Centre seeks Rs. 41,000 crore for banks

The government had announced a Rs. 2.11 lakh crore capitalisation plan in October 2017, of which Rs. 1.35 lakh was to be raised through recapitalisation bonds and the remaining was to be raised by the banks either through the market or the sale of non-core assets. So far, the banks have raised Rs. 24,400 crore and have received all approvals to raise more from the market. The enhanced provision the government has asked for is aimed at four broad categories. The first is to help banks meet the regulatory capital norms. The second is aimed at helping banks currently under the Prompt Corrective Action (PCA) framework to come out of it by improving their capital to risk-weighted asset ratios (CRAR) to 9%, their capital conservation buffers to 1.875% and reduce their net NPAs to 6%. The third category of banks to receive capital would be the non-PCA banks that are in danger of crossing the threshold into the PCA framework. The fourth would be to provide regulatory and growth capital to banks that are undergoing mergers, such as Vijaya Bank, Dena Bank, and the Bank of Baroda, which are to be merged into a single entity. “Three banks are close to the PCA threshold, and so they will be provided capital to strengthen their base,” Financial Services Secretary Rajiv Kumar said at the briefing. “Whichever PCA banks have shown performance in terms of reduction of net NPAs to 6% and improvement in return on assets will be given capital.” The names of these banks are yet to be decided, and they will also be assessed on their performance in Q2 and Q3, Mr. Kumar said. However, he said there were some banks that did not need the additional capital as they were on a healthy base. These include State Bank of India, Bank of Baroda, Indian Bank, and Vijaya Bank. Punjab National Bank is in breach of the PCA benchmark, he said, so it is a likely candidate for additional funds. “The recognition of NPAs, a process which started in 2015, has made considerable headway and is almost complete,” Mr. Jaitley said. “At a time where it had peaked in March 2015, the non-recognition was to the extent of about 7%. That is now at about 0.59%.”

Source  : https://www.thehindu.com/todays-paper/tp-national/centre-seeks-rs-41000-crore-for-govt-banks/article25793635.ece

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