 "Demonetisation, Bank")
The deluge of deposits in public sector banks following demonetisation will not affect the government’s plan to recapitalise them.
The government would continue to infuse capital as planned because the deposits were these banks’ liability and not capital, an official said.
State-owned banks, reeling from record bad debts, need capital not only to meet current adequacy standards but also for Basel-III capitalisation norms, which come into effect from 2018. The government in July allocated Rs 22,915 crore to recapitalise 13 public sector banks, including State Bank of India. The amount is 92% of the budgeted Rs 25,000 crore allocation under this head for the year.
During a pre-budget meeting with Finance Minister Arun Jaitley on Tuesday, banks pitched for recapitalisation in the current and next financial years. They also sought incentives for senior citizen deposits and tax exemption for bad-debt provisioning.
By December, the government was supposed to take a call on allocating the remaining 25% of Rs 25,0000 crore to banks based on their credit growth, quality of credit, cost of operations and recovery. When asked about this, the official said December has not yet ended.
Non-performing assets of public sector banks have risen to Rs 6.3 lakh crore from Rs 5.5 lakh crore in June.
Of their Rs 1.8 lakh crore capital requirement under Basel-III norms, the government has promised to pay Rs 70,000 crore over four years till 2018-19 and has asked state-owned banks to raise Rs 1.1 lakh crore from the market. The infusion will boost the government's shareholdings in the banks, which are under-capitalised relative to their private sector rivals because of restrictions on their ability to sell equity to raise money. In 2015-16, the government provided Rs 25,000 crore in three tranches to public sector banks, and 40% went to banks that needed support.
The government will infuse Rs 10,000 crore each in 2017-18 and 2018-19. Public sector banks have been seeking higher recapitalisation from the government.
