Govt has limited fiscal space to recapitalise banks, says secretary
The finance ministry has given approval to seven public sector banks (PSBs) to tap markets for raising capital needed for expansion and meeting global capital adequacy norms.
Citing fiscal constraints to allocate more Budgetary resources for capital infusion in Public Sector Banks (PSB), the government on Wednesday said they have to tap the market when required for strengthening their capital base.
The government had on Wednesday held a performance review of the PSBs and PSU financial institutions for the quarter ending December, 2014. During the meeting, finance minister Arun Jaitley said the government will ensure financial autonomy to state-owned banks and asked PSB chiefs to take commercial decision without fear or favour.
The government had infused capital of R14,000 crore in 2013-14 in 14 PSBs and decided to infuse R6,990 crore in nine PSBs in 2014-15, said a finance ministry statement.
“Further approvals have been given in 2014-15 to seven PSBs to raise capital from the market,” it said. However, the statement did not disclose names of banks which have got government approval for raising capital through market, not did it give quantum and timing of such public issues.
The government decision to reduce the shareholding of PSBs to 52% would also give these banks headroom to raise capital from the market.
All these efforts are being undertaken to allow the PSBs to meet the Basel-III capital requirements, it said.
Finance minister Arun Jaitley in Budget 2015-16 had said: “The provision is for recapitalisation of public sector banks to enable them to maintain their Tier-I capital at comfortable level.”
“To raise funds, banks have been allowed to reduce government stake to 52%,” he had said. As par of the recapitalisation plan for the current fiscal, the largest public sector lender SBI gets capitalisation of R2,970 crore, followed by BoB R1,260 crore, PNB R870 crore and Canara Bank R570 crore. Public sector banks require R2.40 lakh crore capital by 2018 to meet global Basel III norms.
The government said on Wednesday it has limited fiscal space to recapitalise PSBs and they can raise funds from the market to meet their capital needs.
“The government doesn’t have space to give R20,000 crore or R25,000 crore (for capital infusion) … If banks require further capital they have other means to raise capital including from raising capital from market,” financial services secretary Hasmukh Adhia told reporters.
For the current fiscal, the government had proposed capital infusion of R11,200 crore. However, against that the government disbursed R6,990 crore to nine public sectors banks including State Bank of India, BOB, PNB, Canara Bank and Indian Bank based on their performance. In December 2014, the government had allowed PSBs to raise funds from markets by diluting government holding to 52%.