The government is considering allotting about Rs 30,000 crore to public sector banks in the upcoming Budget as they have been unable to meet minimum regulatory capital requirement, suggested media report.
The newly appointed Finance Minister Nirmala Sitharaman will be presenting the Modi 2.0 government's first full budget on July 5. This would be a big test for the Prime Minister Narendra Modi-led NDA government on the backdrop of India's economy hitting 5-year low growth of 6.8 per cent in 2018-19. One expects this year's budget to set the tone for the government's policy for the next five years.
The fund allocation to PSBs will be crucial to restore the health of the banks which have been grappled with various issues, such as rising bad loans, delays in resolution of large cases under the insolvency and bankruptcy code and liquidity crisis.
As of now, five government-controlled banks are under the Prompt Corrective Action (PCA) framework of the Reserve Bank of India (RBI), who needs capital to maintain minimum regulatory capital ratios as per the Basel III norms. The state-owned banks would require fund for the credit growth, which saw green-shoots of recovery in the recent past.
Last week, Sitharaman held pre-Budget consultations with major stakeholders of financial sector and capital markets, including Reserve Bank of India (RBI) Deputy Governor NS Vishwanathan. They discussed creation of a dedicated liquidity window for non-banking finance companies (NBFC) sectors, review of interest rates on Small Savings Scheme and banks' non-performing assets (NPAs or bad loans) apart from other issues, an official said.
A statement by Finance Ministry also said that capital infusion in PSBs and a separate bond exchange were among other issues discussed.
In financial year 2018-19, the government made capital infusion of Rs 1,06,000 crore in the public sector banks, which was much higher than the earlier provision of Rs 65,000 crore in December 2018.
(With PTI inputs)
Edited by Chitranjan Kumar