Govt may pump Rs 8000 crore into public sector banks

The government is looking to inject an additional Rs 8,000 crore into the cash-starved public sector banks likely by the end of this financial year. 

This is in addition to the prescribed recapitalisation amount of Rs 25,000 crore for the current financial year. 2017-18, finance minister Arun Jaitley has earmarked Rs 10,000 crore.

The finance ministry and the Reserve Bank of India are holding discussions on the issue.

“A final decision on recapitalisation will be taken in 10 to 14 days,” a senior government official, who did not wish to be named, told Hindustan Times. 

The government has already infused Rs 22,915 crore into 13 public sector banks, which include the State Bank of India, Punjab National Bank and Indian Overseas Bank, this financial year. The finance ministry has been regularly reviewing the capital needs of these banks. 

“The government is keeping a close watch on the performance, especially pertaining to recovery of bad loans of the banks that have been recapitalised..we will also assess the growth projections of various banks and then decide on further recapitalisation,” the official added. 

The state owned banks require an amount of Rs 1.8 lakh crore by 2018-19, of which the government has committed to provide Rs 70,000 crore in the next four years. A few banks may also hit the market in the next financial year, depending on their
performance. The gross non performing asset level—loans that have turned unproductive—increased to Rs 6.3 lakh crore as on September end from ₹Rs 5.5 lakh crore at the end of the June quarter — an increase of Rs 79,977 crore on a quarter on quarter basis.

In the economic survey, chief economic adviser Arvind Subramanian underlined the need for setting up a state-owned centralised public sector Asset Rehabilitation Agency or  for bank to deal with the surge in NPAs. 

Subramanian said the issue of NPA has to be addressed at  the earliest. 

Finance minister Arun Jaitley on Friday said that new currency notes of Rs 12 lakh crore have been pumped into the system since November 9 after the announcement of the demonetization exercise.

According to the Reserve Bank of India data that was released on February 24, the currency in circulation was about Rs 11,64,100 crore, the minister said.

“This is the quantum of currency which they, as on February 24, made available in the market. A fortnight has almost elapsed since then..This amount itself would have now increased to beyond Rs 12 lakh crore,” Jaitley said in Parliament during Question Hour.

He, however, said that it was difficult to state an exact figure on how much has been deposited in defunct currency notes of Rs 1000 and Rs 500.