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Govt likely to provide Rs 30,000 crore to PSU banks in Budget 2019

The first budget of Modi 2.0 government is scheduled to be presented on July 5 by Finance Minister Nirmala Sitharaman on the backdrop of India's economy hitting 5-year low growth of 6.8% in 2018-19

Press Trust of India  |  New Delhi 

Nirmala Sitharaman, Finance Minister
New Finance Minister Nirmala Sitharaman

The is evaluating capital needs of state-owned banks, and likely to provide about Rs 30,000 crore in the upcoming Budget to help them meet minimum regulatory capital requirement in the current fiscal, sources said.

The first budget of Modi 2.0 government is scheduled to be presented on July 5 by on the backdrop of India's economy hitting 5-year low growth of 6.8 per cent in 2018-19.

In addition, the public sector banks would also require capital for the credit growth, which has just started picking up. Five weak banks under the Prompt Corrective Action (PCA) framework of the RBI too need capital to maintain minimum regulatory capital ratios as per the Basel III norms.

Besides, if the government goes for another consolidation like of Baroda, the three-way merger would also require additional capital, the sources said.

It is to be noted that the government infused Rs 5,042 crore in BoB to enhance its capital base to meet additional expense due to amalgamation of and

In all the the government made record capital infusion of Rs 1,06,000 crore in the public sector banks last fiscal. It was enhanced from earlier provision of Rs 65,000 crore in December 2018.

As a result of capital infusion, five banks - Bank of India, Oriental Bank of Commerce, Bank of Maharashtra, and - came out of PCA. Following merger of with BoB, it also came out of weak bank category. Out of 11, only five are left under weak bank category of the Reserve

As far as their own resource mobilisation are concerned, sources said, they are unable to tap capital market because of their low share prices.

They are on sale of non-core assets which are not enough, the sources said, adding that PSBs would require capital infusion from the government this fiscal as well.

How much will come would depend on the government fiscal math that the Budget division of the will take a final call near Budget preparation, the sources noted.

Initial estimate indicates capital requirement of Rs 20,000-30,000 crore, provided banks are also able to raise funds on their own from the market both through asset and share sale, they added.

Many banks, including State and (BoB), have already got the board approval for capital raising as and when required.

For example, BoB plans to raise Rs 11,900 crore during the current fiscal through share sale, including Employee Share Purchase Scheme to shore up capital for meeting business expansion requirement.

The bank expects to garner Rs 1,500 crore from Employee Share Purchase Scheme (BoB-ESPS). ESPS will be within overall limit of capital plan 2019-20 of Rs 11,900 crore.

First Published: Sun, June 16 2019. 14:30 IST