Budget 2017: FM allocates Rs 10,000cr towards bank recapitalisation in FY18

Beena ParmarMoneycontrol Bureau

Amid hopes Budget 2017 would increase allocation towards recapitalisation of ailing public sector banks, Finance Minister Arun Jaitley today stuck to the previously-outlined target of infusing Rs 10,000 crore into banks.As part of the government's Indradhanush plan, the government had targetted infusing Rs 70,000 crore through years FY16 to FY19 (Rs 25,000 crore each in the first two years and Rs 10,000 crore in the last two).Bank shares, however, were not overtly disappointed, with the Nifty Bank closing 2.6 percent higher.

“Every capital infusion helps banks but more capital may be required given the increasing bad loan problem," Parthasarathi Mukherjee, Chief Executive Officer and Managing Director with Lakshmi Vilas Bank told Moneycontrol. "Banks will also have to raise from outside.”

As per government's estimates, public sector banks need capital to the tune of Rs 2.4 lakh crore to meet Basel III requirements, even as Finance Minister Arun Jaitley has made clear previously that they are free to raise equity from the markets.Banks are free to sell shares so long as the minimum government stake threshold is maintained at 52 percent.“We will look at raising money by selling non-core assets and raise from the market by issuing bonds or QIP,” another public sector bank official said. 

During the Budget today, the governemnt fixed the target for agricultural credit in 2017-18 at a record level of Rs 10 lakh crore as against Rs 9 lakh crore this year. It also doubled the lending target under Pradhan Mantri Mudra Yojana towards small and medium sector companies of 2015-16 to Rs 2.44 lakh crore.