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25
January 2018
 |
FM (The Total Investment
& Insurance Solutions)
Seeking
to perk up public sector banks that have been hit by huge non-performing assets
(NPAs), the government on Wednesday announced plans to infuse over Rs. one lakh
crore including Rs 80,000 crore through recap bonds and Rs 8,139 crore as
budgetary support during the current fiscal.
The
government will raise Rs. 10,312 crore from the market, Finance Minister Arun
Jaitley disclosed at a press conference here giving details of the recap
programme. The
Total Investment & Insurance Solutions
Of the
recap amount, among others the government will give Rs 10,610 crore to IDBI, Rs
8,800 crore to State Bank of India, Rs 5,375 crore to Bank fo Baroda, Rs 4,865
crore to Canara Bank and Rs 4,524 crore to Union Bank
"We
have announced recapitalisation of PSBs in October, 2017 to the tune of Rs 2.11
lakh crore over two years. I have already moved a supplementary grant in
Parliament on this. The entire objective of this exercise has been that it is
government's prime responsibility to keep PSBs in good health," Jaitley
said.
"We
inherited a very major problem. The problem is of the past. Our objective was
to find solution and create an institution so that the mistakes are not repeated,"
he said. The Total
Investment & Insurance Solutions
Banking
Secretary Rajiv Kumar said the recap plan would enable additional credit
offtake capacity of PSBs by over Rs five lakh crore.
Economic
Affairs Secretary Subhash Chandra Garg said the recap plan would be cash
neutral and the bonds thus issued would be non-SLR (Statutary Liquidity Ratio)
and non-tradable. The
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Jaitley
said while planning recapitalisation the government had two objectives -- which
bank would get how much money and also that what happened in the past leading
to large ammount of NPAs does not repeat itself.
He said
this would be ensured by making sure that banks follow various steps to ensure
that the governance of banks follows higher standards.
The
recap would be accompanied by strong reforms package across six themes
incorporating strong action points, an official statement said.
The six
themes include customer responsiveness, responsible banking, credit off take,
PSBs as Udyami Mitra, deepening financial inclusion and digitalisation and
developing personnel for brand PSB, it said.
"The
overarching framework for the reforms agenda is Responsive and Responsible
PSBs." The
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There
are 21 PSBs in the country that comprise 70 per cent of the banking industry,
said Rajiv Kumar, Banking Secretary.
"This
plan addresses regulatory capital requirement of all PSBs and provides a
significant amount towards growth capital for increasing lending to the
economy," he said.
The Total Investment & Insurance Solutions
"As
discussed earlier this recapitalisation will be front loaded depending on the
performance and merit of the PSB," he said adding that loans above Rs 250
crore would be specially monitored.
The Total Investment & Insurance Solutions
Making
a pitch for responsible banking, Kumar said that banks would need to have a
minimum 10 per cent exposure for consortium loans.
"So
unlike earlier when some parties used to take loans from 13-14 lenders, there
would now be only six-seven lenders." The Total Investment & Insurance Solutions
He also
added PSBs should give loans responsibly so that there are no non-performing
assets. "A separate stressed asset management vertical will be set up in
each PSB. Each bank should adopt a policy according to its core strength."
Allaying
fears among the public in the wake of social media reports on safety of
deposits in PSBs, he said: "Depositors' money in PSB is safe."
The
government also said the banks need to identify non-core assets to monetise it. The Total Investment & Insurance
Solutions
Kumar
added that government would not interfere in any PSB's corporate decision
making. The Total
Investment & Insurance Solutions
Talking
about how to measure progress of recapitilisation, Kumar said an annual index
will be launched, which would be a survey by an independent reputed agency on
it. The Total
Investment & Insurance Solutions
"Taken
together, the recap and 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 accress to banking
services," the statement said.
"It
includes a commitment to banking services within five kilometres of every
village, refund within 10 days of any unauthorised debt in electronic
transactions, a mobile app for locating banking outlets and a mobile ATM in
every undeserved district," it said.The Total Investment & Insurance Solutions
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