Govt to provide more capital to PSU banks, if needed, says Sinha

Budgetary allocation of Rs 25,000 crore notwithstanding, the government is ready to provide more fund to public sector banks to help them get rid of their deep-rooted bad loan problem.

“We will provide more money as necessary to ensure that our banks are well-capitalised,” Minister of State for Finance Jayant Sinha said at a conference of PSU banks — Gyan Sangam — on Friday.

He said the Reserve Bank of India too has made certain changes that will strengthen the bank balance sheet. Besides, the government has also chalked out a consolidation roadmap for banks in the Budget, and a Bank Board Bureau (BBB) has been created with former CAG Vinod Rai as its chairman.

The BBB will work towards better capitalisation of public sector lenders.“We have now a very good sense of...stressed assets. We believe that the stressed assets are about Rs 8 lakh crore of the total advances that public and private sector banks...,” Sinha said.

The government has allocated Rs 70,000 crore for recapitalisation of PSU banks, of which Rs 25,000 crore will be handed out to them in fiscal year 2016-17. But the allocation is criticised by many as far too little, compared with the lakhs of crores of stressed assets in this sector.

“We have about 11.25% of the numbers of stressed assets in the system right now. The good news in all of this is two-fold that the set of stressed assets are stabilised, we know where they are and we know how to deal with them,” Sinha further added.

Asset quality

Sinha said the bank transformation agenda will be carried out in phases. At present, the government is in the second phase of transformation where asset quality or non-performing assets are being looked into.

“We were in phase II, when we were looking at asset quality and really trying to assess the system-wise balance sheet of individual banks so that the process was a necessary pre-condition before we get into the third phase,” Sinha said.