In June, finance secretary Rajiv Mehrishi had said that the government is likely to infuse an additional Rs 11,500 crore in public sector banks for recapitalisation. This money was over and above the Rs 7,940 crore earmarked in the union budget.
The Centre is expected to infuse Rs 70,000 crore into ailing public sector banks by 2018-19.
The government has decided to infuse capital to the tune of Rs 20,000 crore in public sector banks this fiscal, Financial Services Secretary Hasmukh Adhia said. 50%, or Rs 10,000 crore of this money will find its way to "weak" banks.
He said that the money will be infused in banks by as early as September.
In June, finance secretary Rajiv Mehrishi had said that the government is likely to infuse an additional Rs 11,500 crore in public sector banks for recapitalisation. This money was over and above the Rs 7,940 crore earmarked in the union budget.
The markets prepped up in June when the finance secretary said that the government is looking to infuse Rs 57,000 crore in banks over the next two years.
This money is likely to strengthen balance sheets of banks reeling with high non-performing assets and bad loans. In his union budget for the fiscal presented in February, Finance Minister Arun Jaitley had said that the government has earmarked slightly under Rs 8000 crore for capital infusion purposes for the current year.
The amount was low and the banks needed more. Therefore, the government agreed to a further capital infusion but in April said that it will rank banks on their needs for more funds.
In April dna had reported, "The finance ministry is setting up a rating system for public sector banks where their performance will be measured. Still in the planning stage, some of the criteria that are under discussion for the rating are the number of Jan Dhan accounts and financial inclusion programmes that banks have implemented, and the quantum of retail advances undertaken by them against their corporate advances."
Under this method, a higher rated bank will enjoy equity support from the government unlike the practice earlier when government used to support the weaker banks with equity erosion.
Last month, Jaitley agreed that there is merit in the demand from public banks on capital infusion and said that the government will look at this demand seriously over the next few months.
RBI deputy governor SS Mundra also batted for the banks and said that more recapitalisation is needed.
(With PTI)
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