Government will infuse Rs 70,000 crore in state-run banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements.
The government has laid out the four-year programme for Rs 1.8 lakh crore capitalisation of public sector banks with a view to boosting investment and growth in the economy, Finance Minister Arun Jaitley said.
“It is a long overdue step. Government in the past has talked about it. But this time government is actually implementing it,” he said in a statement.
This will boost investment and growth in India, he added.
Public sector banks will need to raise Rs 1.10 lakh crore from markets to meet more than half of their capital requirement of Rs 1.80 lakh crore over the next four years.
Of the total estimated by the Finance Ministry, the government is willing to provide only Rs 70,000 crore – Rs 25,000 crore each in current as well as the next fiscal and Rs 10,000 crore each in 2017-18 and 2018-19.
“Improved valuations coupled with value unlocking from non-core assets as well as improvements in capital productivity will enable PSBs to raise the remaining Rs 1,10,000 crore from the market,” a Finance Ministry statement said.
Earlier in the day, Jaitley sought Parliament’s nod for additional capital infusion of Rs 12,010 crore in PSU banks.
Along with the Budget provision of Rs 7,940 crore, the total planned capital infusion would go up to around Rs 20,000 crore.
“Rs 20,000 crore (capital infusion) would happen as early as possible. It can happen by September after we get approval from Parliament,” Financial Services Secretary Hasmukh Adhia told reporters here.
The remaining Rs 5,000 crore would be provided in the second Supplementary later this year. “The Rs 25,000 crore capital this year will be allocated through three tranches,” the ministry’s statement said.
Of the total amount, Rs 10,000 crore would be provided to weak PSBs, Adhia said, adding that the non-performing assets of PSBs are likely to show improvement in next two quarters.
He further said that the third tranche of capital infusion will come in the last quarter of the current fiscal which will be given to banks which will show improvement in their performance in the nine month period.
Gross NPAs of PSBs at the end of March quarter stood at 5.20 per cent, against 5.63 per cent in December.
The estimate of capital requirement is “based on credit growth rate of 12 per cent for the current year and 12 to 15 per cent for the next three years, depending on the size of the bank and their growth ability”, said the Finance Ministry statement.