Public sector banks (PSBs) no longer have the luxury of default fall-back on the government for capital, SBI Chairman Arundhati Bhattacharya has cautioned.
The SBI chief observed that the government for a very long time has been the main provider of capital to the PSBs.
“You (PSB) need money, the government will give. But I think, we have got to get out of that. That is not the case any more at all. The government is very clear. They will give money only if you are actually efficient in all that you do,” Bhattacharya said at a Confederation of Indian Industry (CII) meet here.
The SBI chief pointed out that if PSBs are looking for capital and if they have to access global pools, the global investors always eye the governance of the bank’s board and the ability of the board to lay out strategies and provide the bank with proper guidance to ensure a sustainable future for it.
In a speech late last month at the Indian Banks’ Association Banking Technology Conference, Viral V Acharya, Deputy Governor, RBI, observed: “We keep hearing clarion calls for more and more government funding for recapitalisation of our public sector banks. Clearly, more recapitalisation with government funds is essential.
Corrective actions “But few have suggested that the government should adopt measures to economise its total cost. It should ask in return from banks it recapitalises significant corrective actions, and wherever possible, injections of private capital for loss-sharing with the taxpayers.”
Credit rating agency ICRA has estimated the capital requirements for PSBs to be in the range of ₹1.5-1.8 lakh crore till FY19 of which ₹65,000-75,000 crore could be by way of Additional Tier-I (AT1) issuances.
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