The government has sought Parliament's approval to infuse Rs 20,000 crore in public sector banks through issue of government securities. This round of bank recapitalisation holds significance as borrowers are expected to default amid the ongoing coronavirus crisis, resulting in the rise in provision costs of the banks. The government is also seeking permission for additional expenditure, involving net cash outgo of Rs 1.67 lakh crore, and gross additional expenditure of Rs 2.35 lakh crore, according to the first batch of Supplementary Demands for Grants for 2020-21. "Approval of the Parliament is sought to authorise gross additional expenditure of Rs 2,35,852.87 crore."
The last round of bank recapitalisation took place in September 2019 when the government frontloaded Rs 70,000 into the government run banks. In the previous few years, the government has infused Rs 3.5 lakh crore in the public sector banks. In FY18, Rs 80,000 crore were infused and in FY19, Rs 1.06 lakh crore were infused through recapitalisation bonds in government banks. No provision was made in the last budget to recapitalise public sector banks in the ongoing fiscal.
Earlier on Monday, Finance Minister Nirmala Sitharaman also sought Parliament's approval to spend Rs 40,000 crore towards enhanced expenditure under Mahatma Gandhi National Rural Employment Guarantee Program.
"Of this, the proposals involving net cash outgo aggregate to Rs 1,66,983.91 crore and gross additional expenditure, matched by savings of the Ministries or Departments or by enhanced receipts or recoveries aggregates to Rs 68,868.33 crore," said the first batch of Supplementary Demands for Grants. The government has also sought Rs 46,602.43 crore towards providing additional allocation under Post Devolution Revenue Deficit Grant to the states as per recommendations for Fifteenth Finance Commission.