 "Banks may demand more capital")
Amid mounting non-performing assets (NPAs), state-run banks are likely to pitch for higher recapitalisation to meet their capital adequacy requirements in the quarterly performance review by Finance Minister Arun Jaitley on Monday.
According to sources, banks will demand more capital infusion from the government than the Rs 25,000 crore allocated for FY17 under ‘Indradhanush’ — the seven-pronged strategy announced in August last year to revamp public-sector banks. This comes in the backdrop of public-sector banks posting Rs 20,000 crore losses in the fourth quarter of the 2015-16 alone. State-run lenders require additional capital to not only meet capital adequacy standards but also gear up for Basel-3 capitalisation norms, which will kick in from 2018.
“Banks are expected to ask for higher capital allocation in the meeting on Monday. They have suffered huge losses in the fourth quarter. But, we’ll ask them to also try and tap the markets to raise capital. They have got the government’s approval,” said a government official.
In the Monday meeting with the heads of 27 public-sector banks and financial institutions, Jaitley will also discuss ways to deal with the bad loans situation, besides reviewing their annual performance and capital requirement of these entities. The government, which had allocated Rs 25,000 crore in 2015-16, plans to pump in an equivalent amount in FY17 and Rs 10,000 crore each in the next two years. The meeting will also take stock of various schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana. Jaitley will also review the progress made with regard to Micro Units Development & Refinance Agency and Stand Up India programme, according to the government. Jaitley had announced in the Budget that the government would provide more capital to state-owned banks if further funds were needed. He had also said that the ways to raise more capital would be looked into. Other than rising NPAs, the other areas to be discussed are deteriorating balance sheets, consolidation and capital requirement during the current financial year.
Public sector banks’ bad loans rose from Rs 2,67,065 crore in March 2015 to Rs 3,61,731 crore in December that year. The gross NPAs of these lenders increased from 5.43 per cent of advances to 7.3 per cent in the same period. Consolidation within public sector banks has already begun with State Bank of India (SBI) proposing to merge five of its associate banks as well as the newly created Bharatiya Mahila Bank with itself.
According to sources, banks will demand more capital infusion from the government than the Rs 25,000 crore allocated for FY17 under ‘Indradhanush’ — the seven-pronged strategy announced in August last year to revamp public-sector banks. This comes in the backdrop of public-sector banks posting Rs 20,000 crore losses in the fourth quarter of the 2015-16 alone. State-run lenders require additional capital to not only meet capital adequacy standards but also gear up for Basel-3 capitalisation norms, which will kick in from 2018.
“Banks are expected to ask for higher capital allocation in the meeting on Monday. They have suffered huge losses in the fourth quarter. But, we’ll ask them to also try and tap the markets to raise capital. They have got the government’s approval,” said a government official.
In the Monday meeting with the heads of 27 public-sector banks and financial institutions, Jaitley will also discuss ways to deal with the bad loans situation, besides reviewing their annual performance and capital requirement of these entities. The government, which had allocated Rs 25,000 crore in 2015-16, plans to pump in an equivalent amount in FY17 and Rs 10,000 crore each in the next two years. The meeting will also take stock of various schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana. Jaitley will also review the progress made with regard to Micro Units Development & Refinance Agency and Stand Up India programme, according to the government. Jaitley had announced in the Budget that the government would provide more capital to state-owned banks if further funds were needed. He had also said that the ways to raise more capital would be looked into. Other than rising NPAs, the other areas to be discussed are deteriorating balance sheets, consolidation and capital requirement during the current financial year.
Public sector banks’ bad loans rose from Rs 2,67,065 crore in March 2015 to Rs 3,61,731 crore in December that year. The gross NPAs of these lenders increased from 5.43 per cent of advances to 7.3 per cent in the same period. Consolidation within public sector banks has already begun with State Bank of India (SBI) proposing to merge five of its associate banks as well as the newly created Bharatiya Mahila Bank with itself.
SBI has five associate banks — State Bank of Bikaner & Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore, and State Bank of Hyderabad.
Of these, State Bank of Bikaner & Jaipur, State Bank of Mysore, and State Bank of Travancore are listed.
SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged.
Credit flow to key sectors including agriculture, insurance and medium and small enterprise sectors, among others, will also be reviewed.
The meeting will be attended by Jayant Sinha, minister of state for finance; Anjuly Chib Duggal, secretary, Department of Financial Services; and senior finance ministry officers.