State-owned banks to get over 25,000 cr in capital infusion this fiscal

The finance ministry is likely to finalise a Rs25,000-crore capital infusion plan for public sector banks (PSBs) this week, even as banks find some of their bad loan worries easing with part of the non-performing loans flowing back in the system in the demonetisation drive.

Flush with the huge unaccounted cash that has flown back into the banking system during the 50-day demonetisation drive from 9 November to 30 December, reports quoting finance ministry sources say. The actual amount of capital infusion would reflect in the final batch of supplementary demand for grants to be presented in the upcoming budget session, they add.

Saddled with rising bad loans, banks have already made a case for higher capital infusion and it is reflected in their demand sent to the ministry, sources added.

While the demonetisation drive affected the normal working of banks, the money that had flown back would help refurbish banks' capital base caused by rising NPAs.

The government has already announced an infusion of Rs22,915 crore, out of the Rs25,000 crore earmarked for 13 PSBs for the current fiscal. Of this, 75 per cent has already been released to them.

PSU banks are to get Rs25,000 crore in each fiscal - 2015-16 and 2016-17. Besides, Rs10,000 crore each would be infused in 2017-18 and 2018-19.

The capital infusion for this fiscal is based on an assessment of the compounded annual growth rate of credit for the last five years, banks' own projections of credit growth and an objective assessment of the potential for growth of each banks, the ministry had said.
 
Under the Indradhanush road map announced last year, the government was to infuse Rs70,000 crore in state banks over four years, while they will have to raise a further Rs1,10,000 crore from the market to meet their capital requirements under Basel-III.

Meanwhile, finance minister Arun Jaitley had last month nudged banks to think "out-of-box" while doing business and dealing with challenges, even as state-owned banks sought higher capital support and tax incentives for senior citizens parking money in fixed deposits.

"The current fiscal is not a conventional year as many major reformative decisions have been taken during the year. There is a need for out-of-box thinking as a series of steps are required about what the government can do and what the banks can do," Jaitley had said.