New Delhi
The government on Thursday said it will enhance the capital infusion in public sector banks to Rs 83,000 crore, taking the total to Rs 1.06 lakh crore for the fiscal. The capital will be pumped in over the next few months, Finance Minister Arun Jaitley said, adding that the move will increase the lending capacity of public sector banks as well as help some of them come out of RBI’s watchlist. The government had earlier announced infusion of Rs 65,000 crore in PSBs in 2018-19, of which Rs 23,000 crore has already been disbursed, while Rs 42,000 crore is remaining.

The government Thursday sought Parliament’s approval for infusion of an additional Rs 41,000 crore. This amount, sought to be infused in the banks through issue of government securities , is over and above the Rs 2.11 lakh crore recapitalisation plan announced in October 2017.

The recapitalisation, the finance minister said, will enhance the lending capacity of state-owned banks and help them come out of RBI’s Prompt Corrective Action framework.

“Now this Rs 1.06 lakh crore this year and Rs 83,000 crore which is remaining is going to be utilised under four different heads. The first of course is to ensure that banks meet their regulatory capital norms.

The third category will be the non-PCA banks which are very close to the PCA red-line will be provided capital so that they do not come under the framework, he said.

Some capital will also be provided to banks which are going to be amalgamated to meet regulatory norms and growth capital, Jaitley added.

Earlier this year, the government had announced merger of Dena Bank and Vijaya Bank with Bank of Baroda.

Jaitley also said the non-performing assets (NPAs) recognition, started in 2015, is almost complete, and the September quarter has shown decline in bad loans.

Gross NPAs of PSBs started declining after peaking in March 2018, registering a reduction of Rs 23,860 crore in the first half of the fiscal.

Speaking to reporters, Financial Services Secretary Rajiv Kumar said three banks were on the verge of being included in the PCA, but with this infusion, they will be safe.

“India’s PCA framework for weaker banks has more onerous thresholds, that is higher capital thresholds and a net NPA threshold that further embeds capital requirement on account of provisioning of NPAs.

“Today’s proposal is an expression of government’s commitment that each PSB is an article of faith, and aims at securing compliance even for the higher regulatory norms,” Kumar said.