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19
December 2018
 |
capital infusion(The Total Investment & Insurance Solutions)
The government is likely to make additional
capital infusion in the public sector banks, Economic Affairs Secretary Subhash
Chandra Garg said Wednesday.
This will be over and above Rs 1.35 lakh
crore capital infusion announced by the government for the public sector banks
(PSBs) in October last year to meet global capital risk norms called Basel III.
Asked whether the government is considering to make additional capital infusion
in PSBs, Garg said, "Yes...wait for the supplementary which is coming up
tomorrow. Most probably tomorrow". The
Total Investment & Insurance Solutions
Additional capital infusion would be done
through recapitalisation bonds as has been the practice since October 2017.
This does not have any impact on the fiscal position of the government as recap
bonds are part of below the line items. According to sources, the government is
considering additional capital infusion of up to Rs 30,000- 40,000 crore in
PSBs as they have been unable to raise required funds from the markets.
As part of the capital infusion plan
announced by the Finance Ministry in October 2017, the government envisaged
that public sector banks (PSBs) would raise Rs 58,000 crore from the stock
markets by March 2019 to meet Basel III norms.
However, due to subdued market conditions,
banks have been unable to raise enough funds from the markets so far. In
addition, nonperforming assets of many banks have seen a spurt in the first two
quarters of this fiscal, putting stress on their bottom lines.
However, the banks have got a breather in
respect of Capital Conservation Buffer (CCB), a part of Basel III norms. The
RBI, at its last board meeting of November 19, deferred the requirement to meet
the CCB target by one year, leaving about Rs 37,000 crore in the hands of
banks.
Despite this relaxation, PSBs need more funds
to meet global capital norms called Basel III as the RBI has retained the
capital to risk weighted assets ratio (CRAR) at 9 per cent, sources said, adding
that the shortfall could be around Rs 30,000 crore.
The government had decided to take a massive
step to capitalise PSBs to the tune of about Rs 2,11,000 crore over the next
two years -- through budgetary provisions of Rs 18,139 crore,
recapitalisation bonds of Rs 1,35,000 crore,
and the balance through raising of capital by banks from the market while
diluting government equity estimated at Rs 58,000 crore.
As per
this plan, the remaining capital infusion is about Rs 42,000 crore. Earlier
this year, the government pumped in Rs 11,336 crore into five PSBs -- PNB,
Allahabad Bank NSE 4.31 % , Indian Overseas Bank NSE 1.35 % , Andhra Bank NSE
2.98 % and Corporation Bank NSE 4.66 % -- to improve their financial health. The Total Investment & Insurance
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