‘Public sector banks need Rs 1.2 tn in urgent capital’

Source: The Hitavada      Date: 07 Nov 2018 09:18:18


Business Bureau,

STATE-RUN lenders require an urgent Rs 1.2 trillion in capital in the next five months and the Government will have to take a bulk of the tab due to weak market valuations of these NPA-saddled banks, says a report.
This is a little more than double the budgeted Rs 53,000 crore of capital infusion for the current fiscal year, Crisil Senior Director, Krishnan Sitaraman said in a report on Tuesday.

If the Government decides to meet this need, this will put further pressure on the fiscal maths, thus its ability to meet the 3.3 per cent fiscal deficit target for the current fiscal year. Already the Government has used up over 95 per cent of the deficit target or the market borrowings as of October end.
The report comes even as the Government is asking the Reserve Bank to lower the minimum capital requirements by getting it at par with global practices -- something the central bank is uncomfortable to meet.

It has also reported to have turned down Finance Ministry demand to transfer Rs 3.6 trillion of its over Rs 9.5 trillion reserves, which the Government wants to use to recapitalise the bleeding banks. The Rs 1.2 trillion capital requirement to meet the Basel-III norms is Rs 21,000 crore more than the Rs 2.11 trillion estimate announced by the Government in October 2017, the report said.

Till now, only Rs 1.12 trillion have been infused into these lenders since October 2017, it said, adding only Rs 12,000 crore has come from the markets, it said.
Most of the required capital has to be infused into the 11 lenders which are under the Prompt Corrective Action (PCA) framework of the Reserve Bank of India, wherein depletion in capital and return on assets, combined with a surge in non-performing assets, has resulted in the severe restrictions on normal operations, it said.