The Centre has moved Parliament to increase the capital infusion it has planned for public sector banks for financial year 2018-’19 to Rs 83,000 crore, Union Finance Minister Arun Jaitley said on Thursday. The Ministry of Finance in a statement said the government has moved a proposal in Parliament for enhanced bank recapitalisation outlay from Rs 65,000 crore to Rs 1.06 crore in the current financial year.
Jaitley said Rs 65,000 crore was earmarked for the current financial year, out of which Rs 42,000 crore is still remaining to be infused. In the Supplementary Demands for Grants 2018-’19 presented in the Lok Sabha on Thursday, the government sought Parliament’s approval for gross spending of Rs 85,948.86 crore, of which Rs 41,000 crore will go to state-owned banks – in addition to the Rs 42,000 crore already remaining to be infused into banks. “This would enable infusion of over Rs 83,000 crore in the coming few months in Public Sector Banks,” the finance ministry statement said.
After capital infusion, the lending capacity of the banks is likely to enhance and will help them exit the Reserve Bank of India’s Prompt Corrective Action framework, Jaitley said. Eleven banks with high bad debts are under the PCA framework currently that prohibits them from further lending.
On Wednesday, Economic Affairs Secretary Subhash Chandra Garg had said that the government is likely to make additional capital infusion in public sector banks. The finance ministry official had also said that the government will seek an interim dividend from the RBI.
In October 2017, the government had said that it would provide a boost to the struggling public sector banks with funds totalling up to Rs 2.11 lakh crore over the next two years. Of the Rs 2.11 lakh crore, the Centre said it aimed to provide Rs 18,139 crore directly through its budget, Rs 1.35 lakh crore through selling bonds, and the rest by selling government stake in the market. This would support credit growth and job creation, the Finance Ministry had said.