PSU banks to get Rs 70,000 crore
Fresh fund infusion to boost GDP growth
By : DC Correspondent
Update: 2015-08-01 01:12 GMT
New Delhi: The finance ministry on Friday outlined a Rs 70,000 crore capital infusion plan into PSU banks over four years to enable them to increase funding to boost the economic activity in the country.
“It is a long overdue step. The government in the past has talked about it. But this time the government is actually impl-ementing it. This will gave a boost for investment and growth in India,” said finance minister Arun Jaitley. As part of the bank recapitalisation plan, the Centre has said that it will infuse Rs 25,000 crore in the current fiscal, which is much higher than the amount earmarked in the Budget at about Rs 7,940 crore.
RBI governor Raghuram Rajan said that the Rs 25,000 crore capital infusion by the government in public sector banks is “adequate and a good beginning”. As per the plan, in the next FY, another Rs 25,000 crore will be infused into the banks. In the next two FYs Rs 10,000 crore will be given to banks in each year.
The finance ministry said PSU banks as of now are “adequately capitalised” but would need another Rs 1,80,000 crore over the next four years. Of this, the government plans to provide Rs 70,000 crore through budgetary support. “Improved valuations coupled with value unlocking from non-core assets as well as improvements in capital productivity, will enable PSU Banks to raise the remaining Rs 1,10,000 crore from the market,” said the ministry.
In the supplementary demand presented in the Parliament, an amount of Rs 12,000 crore has been provided, in addition to Rs 7,940 crores already provided in the budget of FY 2015-16. The remaining Rs 5,000 crore would be provided in the second supplementary later this year. The Rs 25,000 crore capital will be allocated through three tranches.
In the first tranche, about 40 per cent of this amount will be given to those banks which require support. In the second tranche, about 40 per cent capital will be allocated to the top six banks — SBI, BoB, BoI, PNB, Canara Bank, and IDBI Bank — so as to strengthen them to play a vital role in the economy.
The remaining portion of 20 per cent will be allocated to the banks based on their performance during the three quarters in the current year judged on certain performance.