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capital infusion for 10 PSU banks


capital infusion for 10 PSU banks

In support of weak and non-performing public sector banks (PSBs), the Finance Ministry has chalked out a turnaround-linked ???????8,586-crore capital infusion plan for 10 PSBs.

The capital allocation would be linked to quarterly milestones on which all related parties ???????? Banks???????? Board, management, employees and unions must commit, the Department of Financial Services has said.

The 10 banks identified are Allahabad Bank (???????418 crore); Andhra Bank (???????1,100 crore); Bank of India (???????1,500 crore); Bank of Maharashtra (???????300 crore); Central Bank of India (???????100 crore); Dena Bank (???????600 crore); IDBI Bank (???????1,900 crore); Indian Overseas Bank (???????1,100 crore); UCO Bank (???????1,150 crore) and United Bank of India (???????418 crore).

To avail themselves of the capital support, the identified PSBs require a tripartite Memorandum of Understanding (MoU) between the government, PSB management and employees of the PSB concerned.

This MoU is to commit all the participants to the agreement for a time bound plan beginning 2017-18 onwards with quantifiable and measurable milestones which can be monitored on quarterly basis, according to the Finance Ministry.

SBI Caps has been inducted to design detailed bank-wise plan based on which the tripartite agreement can be signed.

The indicative list of initiatives which will form part of the milestone under the MoU will include active NPA management and strengthening of credit underwriting and monitoring process; arranging capital from the market; continuing plan for disposal of non-core assets; divestment of subsidiary stake to closure of loss making domestic/international branches.

Another initiative is rationalisation and reduction of administrative, operating expenses including temporary restructuring of employees???????? benefits (in case of need) which can be reversed as the bank manages to successfully turnaround.

Capital roadmap

As per the Indradhanush roadmap announced in August 2015, the government had promised to infuse ???????70,000 crore in public sector banks over four years. At the same time, they will have to raise further ???????1.1 lakh crore from the markets to meet their capital requirement under Basel-III norms..

In line with this blueprint, PSBs were to get ???????25,000 crore in each fiscal, 2015-16 and 2016-17. Besides, ???????10,000 crore each were to be infused in 2017-18 and 2018-19.

Finance Minister Arun Jaitley had announced in his Budget speech a capital infusion of ???????10,000 crore for PSBs in 2017-18.

Story this fiscal

The Centre has already announced fund infusion of ???????22,915 crore, out of the ???????25,000 crore earmarked for 13 PSBs for the current fiscal. Of this, 75 per cent has already been released to them.

The first tranche was announced in July this fiscal. The main objective was to enhance their lending operations and enable them to raise more money from the market.

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