Bank recapitalisation: Finance Minister Arun Jailtey to approve recapitalisation bonds soon, sources say

The ministry of finance would soon finalise the Rs 1.35 lakh crore recapitalisation bonds for public banks. The Department of Economic Affairs is finalising details of the draft submitted by the Department of Financial Services in consultation with the Reserve Bank of India. Thereafter, it would reach the finance minister's office for the final approval. Under the government's recapitalisation plan, the government plans to pump in Rs 2.11 lakh crore to strengthen public sector banks (PSBs), including re-capitalisation bonds of Rs 1.35 lakh crore, in the next two years. The funding would strengthen the financial of NPA-hit public banks, whose NPA assets increased to Rs 7.33 lakh crore as of June 2017 from Rs 2.75 lakh crore in March 2015.

The government announcement may come during the upcoming winter session of Parliament that will begin on December 15 and continue till January 5. The finance minister had said multiple options for recapitalisation bonds were on the government table, were being examined and the best ones would be explored. Once the structure is in place, the government will frontload bond issuance, and a preliminary assessment indicates that it could be between Rs 70,000-80,000 crore, the official added.

Besides recapitalisation bonds, the finance minister had announced that banks would get about Rs 18,000 crore under the Indradhanush plan over the next two years. Under the Indradhanush road map announced in 2015, the government had announced infusion of Rs 70,000 crore in state- owned banks over four years while they will have to raise a further Rs 1.1 lakh crore from the market to meet their capital requirement in line with global risk norms, known as Basel-III. In the last three-and-a-half years, the government pumped in Rs 51,858 crore capital in the PSBs. The remaining Rs 18,142 crore will be injected into the banks over two years.