PSU banks need more than Rs7,940 cr for capitalisation: RBI
11 June 2015
State-run lenders need more funds than the budgeted Rs7,940 crore (about $1.2 billion) for capitalisation during the fiscal year ending March 2016, Reserve Bank of India (RBI) deputy governor S S Mundra said today.
Mundra said the RBI was in talks with the finance ministry to increase the quantum of assistance in view of mounting bad loans and to support growth. He did not mention how much infusion would be required.
"We have been suggesting to the finance ministry from time to time that the public sector banks need more capital than what budget has indicated. So, we have been raising this issue at various discussions and forums and it was also formally written by Reserve Bank of India," Mundra said.
"Budgeted amount which is over Rs7,000 crore will not be adequate from the both perspective for enabling the bank for clean-up of the books which is required and growth when it comes back, to support it," he said.
The government infused Rs6,990 crore in 9 public sector banks last year based on their performance.
The requirements of banks vary from each other and, Mundra said, there is no single way of calculating the additional quantum of infusion needed beyond the budget amount.
"We have done some broad calculation for entire part of Basel-III committee implementation... What we are trying to indicate is that at this point of time because of certain stress on the book some capital would be consumed for cleaning of the books," he said.
But, he made it clear that capital would be needed to support growth and that growth can be supported only with cleaner balance sheet rather than with stressed assets.
"That is the whole idea of increased capital. It can partly help to clean the balance sheet. Make the balance sheet ready to support when growth returns, additional capital will support the growth also," he said.
On setting up of a platform for recovery of receivables, Mundra said, "We have already invited applications and quite a few applications have been received by RBI. They are currently under scrutiny."
Receivables are what customers owe a company in bills or monetary obligations. A trading platform for receivables would provide cash flow to MSME against such receivables. It will help them overcome cash crunch.
"I would urge and hope that somehow if legislative process is brought in which makes mandatory for large corporates, public sector units and the government departments to compulsorily register on (receivables) trading platform so that when the small and medium units has done any supply to any of these institutions then the payment of receivables on due date becomes legal obligation," he said.
"I believe recovery of dues is a major challenge for MSME so if it can become a legislative process or part of statute it will go a long way in supporting the sector," he said.