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With several public sector banks reporting huge losses in the fourth quarter, the government is considering various options to enhance resources for equity infusion in the lenders this fiscal.
“The Finance Ministry is working on the first tranche of funds to be allocated for recapitalisation of public sector lenders. But, there is a thinking that more funds will have to be allocated as this is being seen as the worst quarter of banks,” said a person familiar with the development.
For 2016-17, the Budget had allocated ₹25,000 crore for re-capitalisation of PSBs. However, Finance Minister Arun Jaitley had promised support to the lenders and said, “If additional capital is required by these banks, we will find the resources for doing so. We stand solidly behind these banks.”
The government is considering options such as internal resource mobilisation by banks as well as increasing government’s recapitalisation for extending support.
Decision soon“A decision on the issue will be taken in the next few months,” said the source, adding that it will also be discussed with the Banks Board Bureau, which is assisting PSBs in strategies for raising capital.
PSBs are estimated to require capital of ₹1.8 lakh crore over the next four years, of which the Centre will provide ₹70,000 crore under the Indradhanush scheme.
Sources said that a number of public sector banks will not be paying any dividend to the Centre, while the others will pay less.
One of the options with the Centre is to completely forego the dividends in 2016-17 from all PSBs.
Alternatively, it could also hike the capital infusion amount for the fiscal and adjust it ₹10,000 crore estimated for the next fiscal.
“Hopefully, the situation for banks will improve next fiscal,” said another source. However, the Centre’s budgetary constraints will also have to be taken into account, said the source.
With efforts on to clean up the balance-sheets of lenders and address the problems of stressed assets, PSBs have declared over ₹10,000 crore as NPAs in the fourth quarter. Punjab National Bank reported the largest loss of ₹5,367 crore during the quarter.
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