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Home Business Budget 2017 Budget 2017: Government earmarks another Rs 10,000 crore for recapitalisation
into public sectorbanks

Budget 2017: Government

earmarks another Rs 10,000
crore for recapitalisation into
public sectorbanks
While a section of the industry feels this figure might not be sufficient,
finance minister Arun Jaitley has promised more infusion, if the situation
warrants fresh recapitalisation.

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Written by George Mathew | Mumbai | Published:February 2, 2017 5:20 am

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7/25/2017 Budget 2017: Government earmarks another Rs 10,000 crore for recapitalisation into public sector banks | The Indian Express

The government will pump in Rs 10,000 crore into public sector banks (PSBs) in the next nancial year
to meet their capital requirements and bail them out from a nancial mess.

Hit by mounting non-performing assets

TOP NEWS
(NPAs) and losses, the government will pump
Karnataka II PUC
in Rs 10,000 crore into public sector banks
supplementary results
(PSBs) in the next financial year to meet their
2017 declared: Check
capital requirements and bail them out from
result online at
karresults.nic.in a financial mess. While a section of the
industry feels this figure might not be
Jobs, facts and ction sufficient, finance minister Arun Jaitley has
promised more infusion, if the situation
warrants fresh recapitalisation.

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7/25/2017 Budget 2017: Government earmarks another Rs 10,000 crore for recapitalisation into public sector banks | The Indian Express

The capitalisation profile of PSBs remains weak as reflected in the Tier-I

capitalisation of 9.5 per cent and overall capitalisation (including Tier-II) of 12.3 per
cent for PSBs as on September 30, 2016. Within Tier-I, their core Tier-I capital stood
at 8.8 per cent as on September 2016. This is against the regulatory requirement
(under Basel-III norms) of Common Equity Tier-I (CET-I) of 8 per cent, Tier-I capital
level of 9.5 per cent and total capital requirement (including Tier-II) of 11.5 per cent
by March 2019.

The capital infusion of Rs 10,000 crore will be a morale booster in scenarios where
PSBs are in dire need of capital for credit growth and Basel-III compliance, said
Ashwani Kumar, chairman and managing director, Dena Bank. For the financial
sector, Rs 10,000-crore allocation towards the PSB recapitalisation looks low, said
Nilesh Shah, managing director, Kotak Mahindra AMC.

India Inc, meanwhile, asked the government to provide more funds. On the
banking side, while the finance minister did allocate Rs 10,000 crore for capitalising
PSBs, FICCI president Pankaj Patel said this figure would have to be increased
during the course of the next fiscal, given the actual requirements of the banks and
the need to support growth.

As on September 30, 2016, six PSBs reported Tier-I capitalisation lower than the
regulatory requirement of 8.25 per cent by March 2017 and four reported overall
capitalisation lower than the regulatory level of 10.25 per cent by March 2017. The
weak capitalisation is despite an equity infusion of Rs 16,414 crore by the
government during the first half of FY17 as well as the changes in Basel-III norms in

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7/25/2017 Budget 2017: Government earmarks another Rs 10,000 crore for recapitalisation into public sector banks | The Indian Express

March 2016 whereby the Reserve Bank of India (RBI) allowed inclusion of
revaluation reserves in Tier-I capital.

Rating agency ICRA said a lower growth in advances during the current year also
reduced the capital requirements for the banks. Credit offtake growth dipped to
four per cent in December 2016, from 9.3 per cent in 2015. Earlier in the year, as
part of its recapitalisation programme for PSBs (Indradhanush), the government
announced an equity infusion of Rs 25,000 crore for FY17. In July 2016, the
government allocated Rs 22,915 crore from the proposed infusion for 13 PSBs and
has, so far, infused Rs 16,414 crore.

Gross NPAs have almost tripled from Rs 228,321 crore in September 2013 to close to
Rs 7 lakh crore. The RBI has already warned against a sharp rise in the NPAs of
banks as the banking stability indicator shows that the risks to the banking sector
remained elevated due to continuous deterioration in asset quality, low profitability
and liquidity. The RBIs stress test indicated that under the baseline scenario, the
GNPA ratio might rise from 9.1 per cent in September 2016 to 9.8 per cent by March
2017 and further to 10.1 per cent by March 2018, it said.

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Feb 2, 2017 at 1:30 pm

Why are you not going harsh with mallya and likes instead of wasting tax payers'
money like this?lt;br/gt;Also why not check all those bank officials who were
involved in the process of letting such loans?

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