Government seeks parliament nod for Rs 41,000 crore additional recap bonds for PSBs

In a bid to help public sector banks (PSB), the government on Thursday sought Parliament nod for Rs 41,000 crore additional recap bonds for them.

CNBC-TV18, on Wednesday, reported that the centre will seek Parliament nod this week on the matter.

The total recap bonds for PSBs after the supplementary grant would stand at Rs 1.86 lakh crore. The amount was earlier Rs 1.45 lakh crore. Out of the Rs 1.45 lakh crore, Rs 80,000 crore was for financial year 2018, while Rs 65,000 crore was for FY19.

However, out of the Rs 65,000 crore for FY19, Rs 42,000 crore worth of recap bonds are yet to be given. In addition, the centre is seeking Rs 41,000 crore.

The government is yet to decide on the allocations of the fund or how much of the fund would be allocated to each bank.

The centre has sought Parliament nod to spend Rs 85,900 crore worth of gross extra spending in financial year 2019 and Rs 15,000 crore worth of net extra spending.

Earlier this month, PTI reported that the government is considering additional capital infusion of up to Rs 30,000 crore in PSBs as they have been unable to raise required funds from the markets.

As part of the capital infusion plan announced by the finance ministry in October 2017, the government envisaged that PSBs would raise Rs 58,000 crore from the stock markets by March 2019 to meet Basel III norms. However, due to subdued market conditions, banks have been unable to raise enough funds from the markets so far.

In addition, non-performing assets of many banks have seen a spurt in the first two quarters of this fiscal, putting stress on their bottomlines. However, the banks have got a breather in respect of Capital Conservation Buffer (CCB), a part of Basel III norms. The RBI, in its board meeting, deferred the requirement to meet the CCB target by a year, leaving about Rs 37,000 crore in the hands of banks.

Despite this relaxation, PSBs need more funds to meet global capital norms called Basel III as the RBI has retained the capital to risk weighted assets ratio (CRAR) at 9 percent and the shortfall could be around Rs 30,000 crore.