The government is likely to seek Parliament’s nod for additional capital infusion into public sector banks (PSB) on Friday. The finance ministry had estimated the need for a capital support of Rs 12,000 crore for PSU banks for FY16, in addition to Rs 7,940 crore provided in the Budget. Sources said approval could be sought for a part of the extra capital under supplementary demands for grants.
The extra capital is being provided following representations from banks that their expansion plans are being held up for want of sufficient capital. The lenders have also been hit by high non-performing assets. Separately, the PSBs had also sought relaxation of recapitalisation norms from performance-based to a need-based one.
Sources said the ministry has in principle agreed to look into the need for relaxing capitalisation norms.
The government recently shifted to a performance-based criteria of recapitalisation. To infuse capital on efficiency parameters, weighted average of return on assets for all PSBs for three years was put together and all PSBs, which were above the average, were considered for capital infusion. The second parameter was return on equity in the last financial year.