PSU banks await capital windfall

$3 billion infusion this year: Fin Secy

Will the government inject Rs 19,000 crore, much more than the Budgeted amount this fiscal, to boost the financial health of public sector banks?

According to Finance Secretary Rajiv Mehrishi, the government is aiming at an infusion of about $3 billion (about Rs 19,000 crore) in the current financial year, and perhaps twice as much in the next year.

The amount is more than double the budgeted Rs 7,940 crore in 2015-16 towards recapitalisation of PSBs to boost their capital and help them meet Basel-III norms.
“What we are aiming at is an infusion of about $3 billion in the current year and perhaps twice as much in the next year,” Mehrishi told a private news channel during a visit to the United States with Finance Minister Arun Jaitley.

The assurance comes after Jaitley met  PSU bank chiefs in the capital earlier and assured them that the government will soon take Cabinet nod to infuse a higher amount of capital into the public lenders.

May tap add-on grants

The government could seek this additional funding through supplementary grants in the Monsoon and Winter sessions of Parliament. Jaitley, however, did not quote any figure for the additional capital to be injected in the PSU banks but said it would be much more than mentioned in the Budget.

“I have not decided on the recapitalisation figure. I had mentioned the figure in the budget this year. But what we require would be much more than mentioned in the budget,” Jaitley told reporters on the sidelines of a public event at Stanford University, where he spoke about India’s economic future.

According to Jaitley, there is merit in PSB demand for more capital. Over the years, the government has reduced the capital infusion in PSBs. The capital infusion was Rs 14,000 crore in 2013-14, which came down to a little over Rs 11,000 crore set aside in Budget 2014-15, and a meagre Rs 7,940 crore in the current year.