PSBs lose out on Rs 6,500 crore government funds; here’s what went wrong

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Updated: December 20, 2017 7:42:41 PM

The Finance Ministry on Wednesday said that under the Indradhanush bank recapitalisation plan, the government did not release 25% of the allocated funds for the year 2016-17 as banks could achieve the set performance targets.

saudi arabia, saudi arabia bank account crackdown, sama bank accounts freeze, saudi arabia bank account freezeThe Finance Ministry on Wednesday said that under the Indradhanush bank recapitalisation plan, the government did not release 25% of the allocated funds for the year 2016-17 (Image: Reuters)

The Finance Ministry on Wednesday said that under the Indradhanush bank recapitalisation plan, the government did not release 25% of the allocated funds for the fiscal year 2016-17 to 13 of the PSBs as those banks could not achieve the set performance targets. Under the Indradhanush Plan, the government allocated Rs 70,000 crore for four years — Rs 25,000 crore each for FY 15-16 and 16-17 and Rs 10,000 crore each for 17-18 and 18-19.

However, the Finance Ministry said that in the fiscal year 2016-17, of the allocated sum of Rs 22,915 crore in 13 of the PSBs under the First Tranche of capital infusion, 25% was not released as banks failed to meet targets. A senior Finance Ministry official told FE Online that the government may release this fund later on the basis of banks’ performance.

“The Government of India has so far infused a capital of Rs. 51,858 crore in Public Sector Banks (PSBs).The Government allocated a sum of Rs. 22,915 [sic] in 13 PSBs during the FY 2016-17 under the First Tranche of capital infusion out of which a sum of Rs.16,414 (75%) [sic] was infused upfront,” the Finance Ministry posted in a tweet.

“The remaining amount was to be infused based on the performance of the respective Public Sector Banks (PSBs). However, none of the banks could achieve the set targets and therefore, the remaining 25% of the allocated capital has not been released so far,” the Finance Ministry added.

Introduced in 2015, the Indradhanush plan was meant to infuse Rs 70,000 crore in state-run banks over four years to meet their capital requirement in line with global risk norms, known as Basel-III. As the bad loans situation in the country is getting bad to worse, the government in a major step to bring in reforms in the ailing banking system, approved an unprecedented Rs 2.11 lakh crore for recapitalisation of banks over the next two years in a bid to clean banks’ books and revive investment in a slowing economy.

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