The capital infusion plan for 2017-18 includes Rs 80,000 crore through recap bonds and the remaining Rs 8,139 crore through budgetary allocation.
The government will infuse Rs 88,139 crore into 20 public sector banks through recapitalisation bonds and budgetary support in this financial year, a move aimed at strengthening these banks' lending capacity and thereby pulling the country out of a three-year low growth slump.
Finance minister Arun Jaitley on Wednesday unveiled details of the recapitalisation package for public sector banks (PSBs) that was announced in October. The capital infusion plan for 2017-18 includes Rs 80,000 crore through recap bonds and the remaining Rs 8,139 crore through budgetary allocation.
“This plan addresses regulatory capital requirement of all PSBs and provides a significant amount towards growth capital for increasing lending to the economy,” the finance ministry said in a statement.
A total of Rs 35,828 crore will be infused into nine banks that haven't triggered prompt corrective action (PCA), including State Bank of India (SBI), Punjab National Bank and Bank of Baroda, among others, while Rs 52,311 crore will be pumped into 11 banks that have triggered PCA, including IDBI, Central Bank of India, and UCO Bank.
“State Bank of India will get Rs 8,800 crore, Rs 3,571 crore for Oriental Bank of Commerce, Rs 3,045 billion for Dena Bank, Rs 5,158 crore for Central Bank of India, Rs 4,694 billion for Indian Overseas Bank, Rs 9,232 billion for Bank of India,” banking secretary Rajeev Kumar said addressing the media.
The fresh capital will bring with it a stringent reforms package based on six themes -- customer responsiveness, responsible banking, credit off take, PSBs as Udyami Mitra, deepening financial inclusion and digitalisation and developing personnel for brand PSB -- as well as incorporating 30 action points.
“Capital will be given to banks on the basis of their performance and credentials,” Kumar said.
Whole-time directors of PSBs would be assigned theme-wise reforms for implementation and their performance in this regard would be evaluated by the respective bank's board. Kumar also said that the regulatory capital of all PSBs will be maintained and the government will not let them fail.
A survey by an independent agency will be conducted to measure public perception about improvements in access and service quality.
“Taken together, the recap & reform agenda is sharply focused on strengthening PSBs, increasing lending to MSMEs and making it easier for MSMEs and retail customers to transact as well as significantly increasing access to banking services. It includes a commitment to banking services within 5 kms of every village, refund within 10 days of any unauthorised debit in electronic transactions, a mobile App for locating banking outlets and a mobile ATM in every underserved district,” the finance ministry said.
Jaitley said the government has also decided to capitalise public sector banks (PSBs) in a front-loaded manner, with a view to support credit growth and job creation.
In October, the government had announced that it would infuse Rs 2.11 lakh crore of capital in PSBs over the next two years through recap bonds, as well as budgetary allocation, as part of a broad plan to create thousands of new jobs, raise income, boost investment and quicken growth in the broader economy.Banks, especially state-owned ones, have been saddled with non-performing assets (NPAs), mainly across six major sectors-- steel, power, roads, highways, and telecom--and are currently in the process of revival given the pile-up of bad loans that threatens to negatively affect their growth. NPAs held by Indian banks stand at around Rs 10 lakh crores.