Public banks need more capital: Mundra

Public banks need more capital: Mundra

The Reserve Bank of India (RBI) Deputy Governor S S Mundra on Friday said that public sector banks (PSBs) may need more capital than the government’s allocation of Rs 70,000 crore in the next four years.

Under the Indradhanush scheme by the government, Rs 70,000 crore in capital is slated to be invested over four years to contain risks in the banking industry and boost the government’s shareholdings in the banks, which have been under-capitalised, compared with their private peers because of restrictions on their ability to sell equity to raise money.

But there is a rider that the money will be allocated to banks based on their performance with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations.

The RBI has from time to time made a strong case for providing more capital to public sector banks to deal with the problem of stressed assets before implementation of Basel III norms. 

RBI has also emphasised that stress build-up in the banks should be contained at the earliest. Talking to reporters on the sidelines of an even here, Mundra also said the RBI had no plans to release second list of defaulters anytime soon.

“If you look at it (NPAs), we are periodically coming out with communications. Soon after ordinance was promulgated, the RBI issued detailed circular. As many as 12 cases have been referred for resolution by Insolvency and Bankruptcy Code (IBC). So, that being the case, where is the question of quickly coming out with another list,” Mundra said.

“Quite possible. To believe that all this (cleaning) can happen without additional provisioning would be too optimistic. I would strongly say we should be realistic rather than pessimistic or optimistic," he said.

Earlier this week, the RBI identified 12 stressed accounts each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total NPAs for immediate referral for resolution under the bankruptcy law.When asked about the names of the 12 accounts, he said, Internal Advisory Committee (IAC), comprising a majority of its independent board members, will come out with the list at an appropriate time.The banking sector is saddled with non-performing assets (NPAs) of over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs).

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