State-run banks are likely to receive the first tranche of government funds for recapitalisation by the end of September, two sources with direct knowledge of the development said. The disbursement has been delayed by a month. The government had earlier informed banks that it would release funds for recapitalisation in three tranches in August, November and February, bankers said. Public-sector banks will received `10,000 crore for recapitalisation in 2017-18 as per the Indradhanush road map. In the Budget, finance minister Arun Jaitley had promised additional allocations, as may be required by the banks. “As per the original plan, the finance minister had said August. But August is almost over. We will definitely receive it by the end of September,” a senior official with a Mumbai-based public sector bank said on the condition of anonymity.

In 2015, the government had announced the Indradhanush road map and said it would infuse `70,000 crore in state-run banks over four years. As per the scheme, the banks will have to raise a further `1.1 lakh crore from the markets to meet their capital requirement in line with Basel-III norms. According to a recent report from Moody’s Investor Service, the top 11 public sector banks will need external equity capital of about `70,000-95,000 crore over the next two years. Moody’s believes capital infusion from the government remains the only viable source of external equity capital because of the public-sector banks’ low capital market valuations, which could deny them the option of raising fresh equity from the capital markets.

Bankers are expecting additional allocations from the government during this fiscal, but said they have not yet received details about it. “We definitely feel that support will come from the government, sooner or later. But how much and what will be the terms, we don’t know at this moment,” a senior banker with another large state-run lender said. Last week, Reserve Bank of India governor Urjit Patel said the government and the RBI were working on a recapitalisation plan for public sector banks reeling under the burden of massive stressed assets. The measures under discussion include raising of capital from the market, dilution of government holding, additional capital infusion by the government, mergers based on strategic decisions, sale of non-core assets or a combination of the above steps. In the April-June quarter, performance of the banks with respect to non-performing assets deteriorated further. Gross non-performing assets of 38 banks jumped by 34.2% year-on-year to `8.29 lakh crore, data from CARE Ratings showed. The NPA ratio increased to 10.21% in June 2017 from 8.42% in June 2016. It was the highest in the last six quarters.

By Shamik Paul