At least 2-3 stronger banks can approach the markets in the first half of the next fiscal as the government will abstain from putting in anymore capital into PSBsNew Delhi: After having infused huge amounts of cash this fiscal, the government is now set to ask public sector banks (PSBs) to look to the market for raising fresh capital in the next fiscal. “At least 2-3 stronger banks can approach the markets in the first half of next fiscal,” a finance ministry official said and added that the government will abstain from putting in anymore capital into PSBs unless for regulatory requirements.
The Centre is also seeking details of the action taken by PSU banks in cases of bad loans above Rs 50 crore.
Govt poured Rs 1.6 lakh crore in the current fiscal
In the current fiscal, the government had already infused Rs 1.6 lakh crores to recapitalise PSU banks in order to help them come out of the Reserve Bank of India's (RBI) prompt corrective action (PCA) framework. Over the next fiscal, the Centre expects the remaining five banks to exit PCA by year-end.
“Some large cases being pursued through bankruptcy route are also expected to finally get settled in the first quarter next fiscal,” the source quoted above said.
According to a recent report by IBA-BCG, stress recognition is almost complete in PSBs. The report also said that the standard restructured advances as a percentage of gross advances have plunged to 0.5 percent in December 2018 from 7 percent in March 2015. The Insolvency and Bankruptcy Code (IBC) has helped PSBs in recovering Rs 98,493 crore in the first nine months of the financial year 2018-19.
Stringent measures aided recovery
The government had last year asked state-run lenders to scrutinise non-performing loans of more than Rs 50 crore for signs of fraud.
Last year, the government had asked all state-run banks to examine non-performing (NPA) loans of more than Rs 50 crore for any sign of fraud. Rajeev Kumar, department of financial services secretary, had tweeted, “PSB managing directors directed to detect bank frauds & consequential wilful defaults in time & refer cases to CBI. To examine all NPA (non-performing asset) accounts & Rs 50 crore for possible fraud.”
Banks had also been asked to seek passport details of borrowers who had taken loans of Rs 50 crore and more. The Centre is now again seeking a status report from PSBs on bad loans to get a clear picture of the situation in order to prepare for any emergency capital that may be required by lenders.
PSU Watch is a business news brand of 27 Frames Communications LLP. It places the spotlight on PSUs, Governance, Bureaucracy, Defence and Public Policy as the sector traverses through a period of radical change.