Govt announces plans to recapitalise PSBs
The government on Wednesday announced the reforms roadmap for the public sector banks and issued details of how the Rs 80,000 crore funds raised through recapitalisation bonds will be allocated to the PSBs by March-end. The plans indicate that IDBI Bank will receive the highest capital infusion of R
Published -
Jan 25, 2018 4:09 AM
The government on Wednesday announced the reforms roadmap for the public sector banks and issued details of how the Rs 80,000 crore funds raised through recapitalisation bonds will be allocated to the PSBs by March-end. The plans indicate that IDBI Bank will receive the highest capital infusion of Rs 10,610 crore, followed by Bank of India, which would get Rs 9,232 crore and State Bank of India, which would get Rs 8,800 crore. A total of around Rs 1,00,000 crore will be infused in the PSBs, which comprise Rs 80,000 crore via recapitalisation bonds, Rs 8,139 crore through gross budgetary support and Rs 10,312 crore of funds raised from the market. Banking Secretary Rajiv Kumar said that the capital infusion will enable bank to support economic growth and increase credit deployment by at least Rs 5 lakh crore in the economy. The government will issue recapitalisation bonds of 6-10 years maturity, carrying interest rate of around 8 per cent or lower. These bonds will be non-tradable and not carry the status of an SLR (Statutory Liquidity Ratio) security. Making public sector banks digitally stronger, improving customer experience and measures to keep close watch on the asset quality of the banks were announced. The government has proposed that corporate loans of more than Rs 250 crore will undergo “specialised monitoring” by agencies, which will raise red flags whenever the original covenants of the loans are violated. Banks have also been asked to ring fence the cash flows of corporate borrowers, to ensure that their earnings are not diverted for other purposes. The government has also mandated each of the PSBs to have a stressed assets management vertical and monetise their non-core assets such as real estate to boost their capital adequacy. Kumar said all banks are being given capital to ensure that they meet the “regulatory requirement.”
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