Millennium Post

War on NPAs to speed up PSBs' capital raising via FPOs

The government's all-out war against NPAs will help in cleaning balance sheets of state-owned banks and expedite fundraising via markets to meet the global Basel III capital adequacy norms, an official said.

"As NPAs get resolved, the balance sheets of the public sector banks will get better, improving the valuation of their stocks," a senior Finance Ministry official said.

So, the banks would be in a better position to raise much-needed funds from the capital market as envisaged in Indradhanush plan, reducing the burden on the exchequer, the official said, adding that faster resolution of non-performing assets means earlier than anticipated public offers from banks.

As it is, the Finance Ministry expects about half-a-dozen banks to raise capital from the market during the second half of the current fiscal.

Some banks like State Bank of India, Bank of Baroda and Punjab National Bank have potential to go for public offers during the course of the year, the official said.

As per the Indradhanush plan, public sector banks need to raise Rs 1.10 lakh crore from markets, including through follow-on public offers, to meet Basel III requirements which kick in from March 2019.

This will be over and above Rs 70,000 crore banks will get as capital support from the government. Of this, the government has already infused Rs 50,000 crore in the past two fiscals and the remaining will be pumped in by the end of 2018-19.

SBI has already taken board approval for raising up to Rs 15,000 crore through various means, including public offer and overseas issuance of shares, during the current fiscal.

The funds will be raised either through follow-on public issue, qualified institutional placement, rights issue, private placement, Global Depository Receipt, American Depository Receipt or a combination of these, SBI had said last month.

The fund-raising will be done at an opportune time or as may be approved by the government and the RBI, it added.

Meanwhile, the government will continue to support public lenders based on requirements as was announced by the Finance Minister in his Budget speech, the official said.

In the Budget 2017-18 speech on February 1, Finance Minister Arun Jaitley announced capital infusion of Rs 10,000 crore for the current fiscal.
"In line with the Indradhanush road map, I have provided Rs 10,000 crore for recapitalisation of banks in 2017-18.

Additional allocation will be provided, as may be required, Jaitley had said.
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