Govt will support performing banks: RBI

The Reserve Bank of India (RBI) seems to have endorsed the government’s move to provide capital in efficient banks and said public sector banks’ owner will only support the efficient ones.

“Government has decided to apportion the limited resources available based on certain parameters. It wants to drive home the message to PSU banks that if you are performing well, we will be supporting you,” R Gandhi, deputy governor of RBI said on the sidelines of an event.

The government has decided to allocate capital to only nine PSBs in the current financial year, those that have shown efficiency in recent years. As a result, some lenders reeling under pressure due to mounting bad loans and depleted capital reserves have been left out.

The government has allocated Rs 6,990 crores towards capital infusion in nine PSBs this financial year, compared with Rs 11,200 crores allocated in the Interim Budget for FY15 announced by the United Progressive Alliance government.

“Those who have performed better than average have been rewarded,” the finance ministry had said in a statement earlier this month. For the allocation of capital, two parameters were considered — the weighted average return on assets (RoA) for all PSBs for the past three years (those scoring above average were considered) and return on equity (RoE) in the last financial year.

Lenders that have received the highest share of capital were State Bank of India (Rs 2,970 crores), Bank of Baroda (Rs 1,260 crores) and Punjab National Bank (Rs 870 crores).

Gandhi also said that the banking regulator have been alerting banks to restrict slippages from restructured assets.

“Continuously we have been telling banks that there could be slippages in the restructured assets. We have been warning banks to take extra care or it could get worse based on the entire stressed assets and not just NPAs,” Gandhi said.

He also said some experts are of the view that that bad assets can be taken off the books and should be managed by the government. “The government has to decide. We are also assessing if this is relevant to us,” he said.