Recap aimed at reforming PSBs: Patel

Recap aimed at reforming PSBs: Patel

Reserve Bank of India Governor Urjit Patel on Wednesday said that the planned Rs 2.11 lakh crore fund infusion for state-run banks is not only a recapitalisation package, but to ensure that the seeds of boom-and-bust-lending cycle is not sown in future.

In October, the government had announced a Rs 2.11-lakh crore capital infusion into the NPA-hit public sector banks over the next two years. Of this, Rs 1.35 lakh crore will be through recapitalisation bonds a small portion of which will also come from capital markets, and the remainder Rs 76,000 crore will come from Budgetary support. "This will be reform and a recap package and not just a recap package, so as to ensure that this money is used to strengthen public sector banks' balance sheets, and that we don't sow the seeds of the next boom and bust cycle of lending," Patel said.

He said the recap plan will be differentiated across banks. "In particular, recapitalisation bonds will be front-loaded for banks that have managed their balance sheets more prudently and can use injected capital to lend, besides providing for legacy asset losses," he added.    

Meanwhile, the RBI has decided to rationalise charges on debit card transactions based on category of merchants.

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