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70K Crore for Public Sector Banks
Aug 05, 2015

As a slew of public sector banks reported a sharp rise in bad loans in the first quarter of the fiscal, the finance ministry recently announced four-year roadmap for infusing Rs 70,000 crore in state run banks. Finance Ministry also sought additional funds to the tune of Rs 12,010 crore for bank recapitalisation as part of the first supplementary demand for grants for 2015-16.

  • As of now, the PSBs are adequately capitalised and meeting all the Basel III and RBI norms.

  • The government wants to adequately capitalise all the banks to keep a safe buffer over and above the minimum norms of Basel III. 

  • Finance Mintry has estimated how much capital will be required this year and in the next three years till financial year 2019.

  • As part of the plan, the government would infuse Rs 25,000 crore each into PSBs in the current and the next fiscal and then follow it up with Rs 10,000 crore each in 2017-18 and 2018-19.

  • Based on based on credit growth rate of 12 per cent for the current fiscal and 12 per cent to 15 per cent for the next three years, the finance ministry has pegged the total requirement for additional capital by PSBs at Rs 1,80,000 crore by March 31, 2019.

  • In the Supplementary Demand, an amount of Rs 12,000 crore has been provided, in addition to Rs 7,940 crore already provided in the Budget 2015-16. The remaining Rs 5,000 crore would be provided in the second Supplementary later this year.

  • Budget for current financial year had allocated Rs 7,940 crore towards recapitalisation of state run banks. The provision is for recapitalisation of public sector banks to enable them to maintain their Tier-I capital at comfortable level.

  • During the current financial year, Rs 10,000 crore would be allocated to banks that have low capital adequacy ratio, while a matching amount is expected to go to the stronger players, helping them lend at a time when the government is trying to boost economic activity.

  • This estimate (of Rs 1.8 lakh crore fund requirement in four years) is based on credit growth rate of 12% for the current year and 12-15% for the next three years depending on the size of the bank and their growth ability. 


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