NEW DELHI: In a sustained effort to help banks facing mounting non-performing assets of Rs 8 lakh crore, with the public-sector banks alone accounting for Rs 6 lakh crore, the finance ministry is likely to announce a capital infusion strategy in the next few weeks.
This will be the second such move after July 2016, when the banks received capital in two tranches and 13 public-sector banks benefited. The government had released Rs 22,915 crore in 2016.The process to work out the strategy for this year has begun in the Department of Financial Services following a directive from Finance Minister Arun Jaitley. He had recently stated that the government was working on a plan to rebuild the capacity of India’s banking sector to help it grow.“…the discussion has been going for the past few months. Last week, too, we had a meeting on capital infusion strategy for the public-sector banks and an announcement can be expected before the year-end,” said a senior finance ministry official.
The official also stated that the department is waiting to assess the second quarter results to get clarity on the capital requirements for the current fiscal.
While state-run banks are likely to get capital to meet regulatory requirements in general, performing banks can use the money to boost credit disbursement. Issuance of capitalisation bond for meeting their capital needs, too, is under discussion.The Indradhanush scheme has assigned Rs 10,000 crore for the current fiscal. However, bankers feel it may not be adequate.
High provisioning requirement for bad loan resolution through various processes, including insolvency and bankruptcy, is one of the reasons.‘Indradhanush’ was announced in August 2015 for the revamp of public-sector banks.