Minister of state for finance Jayant Sinha said on Wednesday the government was in the process of finalising a comprehensive package for strengthening state-owned banks that would also include fresh capital infusion over the next three years.
At a conference organised by the Indian Venture Capital Association, Sinha said the proposed package would have five components, including measures for improving governance and management, making the selection process transparent, making banking operations more efficient, sharpening banks’ strategies as well as capital raising plans and capital infusion by the government.
“We are working and trying to understand exactly what the capital requirements are going to be in the next two to three years for (state-run) banks. We are there to support and provide them with the capital that they need,” said Sinha. The minister would meet a few banks in Bangalore on Thursday to deliberate further on this.
A high-level panel comprising Sinha and Financial Services Secretary Hasmukh Adhia is assessing their capital requirement.
Last year, finance minister Arun Jaitley had said state-owned banks needed R2.40 lakh crore as capital infusion by 2018. For the current fiscal, the government has allocated R7,940 crore in the Budget. However, Jaitley who reviewed banks’ capital requirement on June 13 said that lenders had “put up a strong case” for additional capital and that he saw merit in their demand. Jaitley wants the government to retain its ownership in public sector banks with at least 52% stake and let them raise capital by increasing public shareholding in a phased manner.
The government infused capital of R12,000 crore into public sector banks in 2011-12, R12,517 crore in 2012-13, R14,000 crore in 2013-14 and R6,990 in 2014-15. The ministry wants banks to find their own resources for raising capital and also work out plans for raising capital from market. Sinha also promised that all outstanding concerns of the venture capital industry relating to taxation, especially of those managing global assets from India, would be addressed.