Jaitley promises additional capital for PSU banks

 Finance Minister Arun Jaitley on Friday promised more capital infusion into public sector banks, saying there’s “merit” in their demand for more funds over and above what was provided in the Budget. “Banks have made a strong case for additional capital...And over the next few months, this is something the government is going to seriously look at,” Jaitley said after meeting heads of PSU banks here.

“...I do believe it’s a case which has merit (attention).” The government has earmarked Rs 7,940 crore in the Budget for recapitalisation of PSU banks for the current fiscal. The statement assumes significance as RBI Deputy Governor S S Mundra had yesterday said the Budget amount marked for recapitalisation of PSU banks is not adequate and RBI has asked the Finance Ministry to raise the quantum of assistance in view of mounting bad loans and support growth. On additional quantum to be infused, Jaitley <g data-gr-id="33">said</g> “it’s only after discussions within the government and looking at our own abilities on the matter that your question can be answered”. Last fiscal, the government infused Rs 6,990 crore in nine public sector banks based on their performance.

When asked why banks are not opting for the market route to raise capital, the Minister said banks do so taking into account the market conditions and stability. “They (banks) are free to take <g data-gr-id="28">decision</g> (on tapping the market) at an opportune time,” he added. On bad loans, Jaitley said although NPAs (non-performing assets) came down in the fourth quarter, it’ll take a while before a comfort level is reached.

“In the quarter ended March 2015, NPAs had come down from 5.64 per cent to 5.2 per cent. <g data-gr-id="42">One quarter</g> does not indicate a pattern. So, I would wait for some more time before realising what the pattern is,” he said. Banks’ assessment is that it will take them 2-3 quarters “to reach a somewhat greater comfort level”, he said, adding that they themselves are going to make an effort to reduce NPAs. “We did ask each of the banks that have higher NPA levels to explain the reasons and those groups where defaults were higher,” he said. On stalled projects, the Finance Minister said there is a lot of concern in this regard and many have started. “Therefore, we decided that even though in Cabinet Secretariat an effort is being made, the Prime Minister himself has taken a series of meetings. The DFS Secretary purely from the banking point of <g data-gr-id="38">view,</g> will prepare a list of those projects which are stalled on account of reasons of finance,” Jaitley said.