The government is working on capital infusion plan for public sector banks and will decide on raising the amount after Rs 25000 crore provided in the Budget for 2016-17 is exhausted, Bank Board Bureau chairman Vinod Rai said on Thursday.
He said the government expects a healthy growth in credit offtake as a result of the resolution mechanism for bad loans being put in place.
“Let the government first disburse (Rs) 25,000 crore that it has provided for this year then after the banks results, if need be, then we will look at how much more is required,” Rai said after a meeting of the Bureau.
The finance ministry has earlier indicated that it may provide Rs 5,000-7,000 crore of extra capital if required. The government will provide capital based on three parameters — capital adequacy, performance of the banks and projected capital growth. Rai said the Bureau’s first priority is that lending process must start and secondly vacancies must be filled up.
“We have met some managing directors today (Thursday) and will be meeting some of them tomorrow (Friday). They are very confident that the resolution mechanism (for bad loans) that we have put in place will help resume the lending process. We will see a healthy growth in credit offtake. We have provided the banks the comfort that they required,” said Rai, former Comptroller and Auditor General of India. He said the passage of the Bankruptcy law strengthens the hands of the bankers. The Rajya Sabha on Wednesday passed the Insolvency and Bankruptcy Code, 2015 — aimed at speedy winding up of companies, lower non-performing assets and redeployment of capital for productive uses. The bill was cleared by Lok Sabha last week.
The Bank Board Bureau has been constituted earlier this year to help the government select heads of PSU banks and financial institutions responsible for selecting heads and non-official directors on the boards of public sector banks. Apart from appointments, the Bureau is discussing a number of issues concerning PSU banks such as mergers and consolidation, capital infusion and bad loans.
Besides the Chairman, the Bureau has three ex-officio members and three expert members — ICICI Bank’s former Joint MD H N Sinor, Bank of Baroda’s former CMD Anil K Khandelwal and rating agency Crisil’s ex-chief Rupa Kudwa.
The idea of Bank Board Bureau was mooted in 2014 by the P J Nayak committee, which was set up by the central bank to review governance of boards of banks in India.