Capital infusion of Rs 25,000 cr a good beginning: Rajan

Finance Minister Arun Jaitley today sought nod for another Rs 12,010 cr for recapitalisation of PSBs

Reserve Bank of India Governor Raghuram Rajan on Friday said Rs 25,000 crore of capital infusion planned by the government in public sector banks this financial year was “adequate and a good beginning”.

While Finance Minister Arun Jaitley had in Budget for 2015-16 provided Rs 7,940 crore towards recapitalisation of public sector banks, he on Friday sought Parliament nod for another Rs 12,010 crore in the first supplementary demand for grants. Another Rs 5,000 crore will be provided in subsequent supplementary demand through the year totaling Rs 25,000 crore of capital infusion.

“Allocation for first-year recapitalisation is adequate,” Rajan said, when asked to comment on the infusion plan.

“It’s a good beginning,” he said after his customary meeting with Jaitley ahead of the third bi-monthly monetary policy on August 4. The finance ministry, in a statement, said public sector banks as of now are “adequately capitalised”, but would need Rs 1,80,000 crore extra capital over the next four years (up to FY19).



Of this, the government plans to provide Rs 70,000 crore through budgetary support — Rs 25,000 crore each in current and next financial year and Rs 10,000 crore each in 2017-18 and 2018-19. Banks would be required to raise the remaining amount of Rs 1.1 lakh crore from the market, the statement said.

RBI Deputy Governor R Gandhi said the decision to infuse Rs 70,000 crore over the next four years was a welcome move by the government.

As for the Rs 1.1 lakh crore required to be tapped by banks over the next four years, he said there was enough appetite in the market for that.