RBI raises pitch for higher capital infusion in PSBs

A day ahead of Finance Minister Arun Jaitley calling a review meeting of public sector bank (PSB) chiefs, the Reserve Bank of India (RBI) has written to the Finance Ministry urging it to increase capital infusion into the PSBs.

In the annual Budget for 2015-16, the government had announced a capital infusion of Rs 7,940 crore into the state-run banks, which is nearly half of the amount committed in the Budget for 2014-15.

“We have been suggesting to the Finance Ministry from time to time that the public sector banks need more capital than what budget has indicated. We have been raising this issue at various discussions and forums and it was also formally written by Reserve Bank of India,” RBI Deputy Governor S S Mundra said here.

“Budgeted amount which is over Rs 7,000 crore will not be adequate for enabling the bank for clean up of the books,” he said. The RBI in its monetary policy statement on June 2 had highlighted the need for targeted capital infusion of bank capital into scheduled public sector banks to ensure adequate capital flows to the productive sectors as investment picks up and to clean up stressed assets in their balance sheets.

The heads of PSU banks will be meeting the Finance Minister on Friday for an annual review of the performance.  Jaitley is expected to review the annual financial performance of the PSBs during  the financial year 2014-15. He will also review the performance of banks with regard to their performance in overall credit growth with particular reference to agriculture credit, MSE credit, education loans, housing loans and non-performing assets of the banks.

Jaitley is also expected to review the progress of three social security schemes — Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) among others.

He will also review the progress made with regard to Micro Units Development & Refinance Agency (MUDRA), expeditious disposal of public grievances and Credit Enhancement Guarantee Scheme for Scheduled Castes among others. On their part, the PSU banks heads are expected to pitch for the need for higher capital infusion.