SBI received Rs 8,800 crore from DFS in FY18 without asking for it: CAG

The State Bank of India (SBI) received Rs 8,800 crore from the Department of Financial Services (DFS) as part of a recapitalisation exercise without asking for such funds in 2017-18, a report presented by the Comptroller and Auditor General of India (CAG) in the Parliament on Monday said.

According to the "Compliance Audit Report Number 1 of 2023 of the CGI on Union Government (Economic and Service Ministries - Civil)" for FY21, the department under the finance ministry did not conduct an assessment of the capital requirement according to its own standard practice before recapitalisation.

"DFS infused Rs 8,800 crore into SBI in 2017-18 for credit growth considering it the largest Public Sector Bank (PSB) in the country even though there was no demand. DFS did not conduct an assessment of the capital requirement as per its own standard practice before recapitalisation," it said.

The report further said DFS considered the cushion over and above the norms prescribed by the Reserve Bank of India (RBI) while recapitalising PSBs.

"RBI had already prescribed enhanced capital requirements of an additional 1 per cent on banks in India. This resulted in an excess infusion of Rs 7,785.81 crore," it said.

DFS infused Rs 831 crore into Bank of Maharashtra in 2019-20 against the bank's demand of Rs 798 crore to avoid the surrender of funds amounting to Rs 33 crore, it added.

The government recapitalises PSBs for credit growth, meeting the requirement for regulatory capital, equipping better performing lenders placed under Reserve Bank of India's Prompt Corrective Action framework to come out of it and meeting capital requirements on account of amalgamation.

(With agency inputs)