Recapitalisation is a major issue for state-run banks owing to the massive non-performing assets (NPAs), or bad loans, accumulated by them and they are now exploring various sources of raising capital, according to a leading public sector bank (PSB).
"Banks' capitalisation is a major issue for PSBs. We have to make high provisions, also now with the NCLT (National Company Law Tribunal) cases," UCO Bank Chief Executive RK Thakkar told BTVi channel.
The Reserve Bank of India (RBI) has identified the second batch of large accounts which have defaulted in repayment of loans and has advised banks to resolve them.
In June, the RBI had come out with a list of 12 large accounts, which totalled about 25 per cent of the current gross NPAs of the banking system for reference to the NCLT under the Insolvency and Bankruptcy Code (IBC).
"We are trying various source to raise capital... We have requested the government for support, but for the balance beyond the budgetary support we have to go to the market, depending on the appropriate time," Thakkar said.
He said the UCO Bank's capital requirement for the current fiscal is to the tune of Rs 3,000 crore and "with the provisioning required for the NCLT cases the requirement may go up to another Rs 500-600 crore."
The RBI has also advised banks to make higher provisions for the accounts to be referred under the IBC.
This was intended to improve bank provision coverage ratios and to ensure that banks are fully protected against likely losses in the resolution process.
Thakkar said that he expected the first tranche of the government support to arrive to the bank in a month's time.
He also said that recapitalisation bonds would be one of the possible instruments to explore in the efforts to supplement the government recapitalisation.
The PSBs have accumulated a high ratio of NPAs, going up to 17-18 per cent of their loan portfolio.
The government has committed Rs 70,000 crore for banks' recapitalisation over five years, of which Rs 10,000 crore remains to be disbursed for the current fiscal.