PSBs funding to exceed budgeted amount in FY15-16

FM mum on applying efficiency test

Finance Minister Arun Jaitley on Friday promised more capital infusion in public sector banks and said he will take a Cabinet nod for a higher amount than budgeted for this year.

At a press conference after the annual review of banks, Jaitley said that banks have sought more capital and the government is considering this request. He, however, declined to comment if the capital infusion will be based on efficiency of the lenders.

“Banks have made a strong case for more capital. It merits the government to seriously look into it,” he said. The minister said that Union Cabinet will a take a decision on this.

In the annual Budget for 2015-16, the government had announced a capital infusion of Rs 7,940 crore into state-run banks, which is nearly half of the amount committed in Budget for 2014-15. The government was concerned about the financial health of the public sector and the increasing NPAs, which were impacting their credit growth, he said.

“The increase in NPAs is due to some infrastructure projects,  slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower growth rate of credit, because of which NPA as percentage of total credit has gone up.”

“The PSBs continue to be under stress on account of their past lending. It emerged in the meeting that a sector by sector approach is necessary for NPA solutions,” he said. “In the fourth quarter of January to March 2015, NPAs had come down from 5.64 to 5.2 percent. But, as I’ve said earlier, one quarter doesn’t indicate the pattern... I would like to wait.”

Infra projects in focus

With regard to stalled infrastructure projects raising distressed loans and putting a stress on banks’ balance sheets, Jaitley said the finance ministry will look into the matter at the highest level.

“Many stalled projects have started. The secretary, department of financial services, in consultation with others, will prepare a list of projects stalled because of finance.” He added that his ministry will deal with stalled projects directly.

PSB reforms on cards

PSB make strong case for more capital
Increasing NPAs bear impact on credit growth
Ministry to deal with stalled projects directly