Capital infusion for PSBs to be finalised by December

Capital infusion for PSBs to be finalised by December

The Finance Ministry is working on a capital infusion strategy for the public sector banks (PSBs), and it is expected to be finalised by December, according to official sources.

The Department of Financial Services is assessing the capital needs of various banks based demands made by them, sources said.

There are various parameters which are being looked at for capital infusion exercise, including NPA ratio, credit growth, insolvency proceeding etc, sources said, adding that the second quarter result would also give clarity on the capital requirements for the current fiscal.

Various factors are being considered before arriving at the exact number and the final output is likely by next month or December, they said.

Besides providing capital for meeting regulatory requirements, the ministry is looking at providing capital to performing state-run banks to boost credit disbursement.

One of the options on the table is issuance of capitalisation bond for meeting their capital needs but no final decision has been taken yet.

The government followed a similar strategy in 2008 when it sold bonds worth about Rs 10,000 crore to subscribe to nearly 60% of State Bank of India’s rights issue.

Last week, Finance Minister Arun Jaitley said the government, faced with a ‘Catch-22 situation’ over the issue of non-performing assets, is working on a plan to rebuild the capacity of India’s banking sector so as to support growth.

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