The interim Budget brought some cheer to the public sector banks with Finance Minister P Chidambaram promising capital infusion of ₹11,200 crore in these banks for 2014-15.
However, some bankers rued in private that the amount provided for 2014-15 was not enough and pointed out that it was lower than ₹14,000 crore allocated for 2013-14.
This is because the Government’s capital infusion in such banks will not be enough to fund their business growth.
Pref allotments Faced with weak market conditions, most public sector banks had in 2013-14 mobilised capital only from the Government through preferential allotments.
They had refrained from approaching the markets for capital mop-up.
But with the Government’s capital infusion for 2014-15 proposed to be lower–than-expected, many banks will have to look at other modes for capital raising, say banking sector observers.
Crop sops Chidambaram also announced on Monday that the interest subvention scheme for crop loans would continue in 2014-15.
He also hiked the agricultural credit target to ₹8,00,000 crore for 2014-15 as against current fiscal’s targeted ₹7,00,000 crore, which banks are expected to meet comfortably.
Bankers’ views The Centre expects bankers to act more diligently while lending so that slippages can be contained, SL Bansal, Chairman & Managing Director, Oriental Bank of Commerce, told Business Line .
NPA recovery “The Government wants us to quickly recover the non performing assets so that internal accruals can be improved and used for capital infusion,” Bansal said.
V Kannan, Chairman & Managing Director, Vijaya Bank, said that capital requirements of banks will be higher in 2014-15 considering the expected upturn in economy.
This will necessarily prompt banks to look at alternate sources (other than Government) for raising capital, he said.