The Centre on Tuesday allocated ₹22,915 crore as capital infusion (in 2016-17) in 13 public sector banks that are burdened with non-performing loans, to help improve their liquidity and support lending operations.
Of the allocated amount for each bank, 75 per cent has been released for now, “to provide liquidity support for lending operations and enable them to raise funds from the market.” The balance amount is linked to performance and would be released later, the Finance Ministry said on Tuesday.
As part of its Indradhanush plan to revitalise state-owned lenders, the Finance Ministry plans to infuse ₹70,000 crore in the four-year period between 2015-16 and 2018-19. The gross bad loans of PSBs increased to 9.6 per cent as of March 2016, from about 6 per cent a year earlier, according to the Reserve Bank of India. The Union Budget 2016-17 had allocated ₹25,000 crore for bank re-capitalisation.
The country’s largest public sector bank State Bank of India has received the highest amount (₹7,575 crore), followed by Indian Overseas Bank (₹3,101 crore) and Punjab National Bank (₹2,816 crore).
Bank of India received ₹1,784 crore and Central Bank of India ₹1,729 crore, while Allahabad Bank received the least amount (₹44 crore).
“The capital infusion exercise for the current year is based on an assessment of need as assessed from the CAGR of credit growth for the last five years, banks’ own projections of credit growth and an objective assessment of the potential for growth of each public sector bank,” said a Finance Ministry statement.
Wilful defaulters Meanwhile, Finance Minister Arun Jaitley on Tuesday also informed Parliament that there are 8,167 wilful defaulters, who owe banks a cumulative amount of ₹76,685 crore.
He further said that many defaults on banks have been from sectors such as steel, infrastructure and power, and the government has worked to address the problems of these sectors in the past year and a half.
Expressing the hope that the measures to help banks and the passage of the Insolvency Code would have a positive impact, he told Rajya Sabha that a Joint Committee of Parliament is looking into a Bill relating to debt recovery, which aims at empowering banks to take more effective steps in dealing with default situations.
Banks welcome it Arundhati Bhattacharya, Chairman of SBI, said, “The provision of bank capital is most welcome and is very timely. We are hopeful that such provision of capital will help the banks in increasing lending, raising additional funding and cleaning up their balance sheets.”
TN Manoharan, Chairman, Canara Bank, welcomed the government move to infuse ₹997 crore capital into Canara Bank. “The government has taken the right step. This will would help Canara Bank undertake its planned expansion more confidently,” he told BusinessLine .
In April this year, Canara Bank had raised ₹3,000 crore in the form of Tier-2 bonds.
Animesh Chauhan, Chief Executive Officer & Managing Director, Oriental Bank of Commerce, said he was quite hopeful that OBC, which had sought capital to fund business growth for 2017-18, would get some capital allocated in the next tranche.
He said that OBC had not sought any capital for 2016-17 for which allocations were announced today.