Govt seeks Parliament nod for Rs 80k cr PSBs recapitalisationhttps://indianexpress.com/article/india/govt-seeks-parliament-nod-for-public-sector-banks-recapitalisation-slr-5011398/

Govt seeks Parliament nod for Rs 80k cr PSBs recapitalisation

The Rs 80,000-crore expenditure has been sought by the government in form of the Third Batch of Supplementary Demands for Grants for 2017-18.

public sector banks, recapitalisation, parliament, indian express, SLR, Statutory Liquidity Ratio, finance ministry, arun jailtley, bonds, recapitalisation bonds, non-SLR status
Union Finance Minister Arun Jaitley. Express photo: Prem Nath Pandey

The finance ministry on Thursday sought Parliament’s nod for an extra expenditure of Rs 80,000 crore towards recapitalisation of public sector banks through bonds. Meanwhile, sources said the proposed recapitalisation bonds to be given to public sector banks would have non-SLR status and will be non-tradeable, reports PTI.

The Rs 80,000-crore expenditure has been sought by the government in form of the Third Batch of Supplementary Demands for Grants for 2017-18. It is part of Rs 1.35 lakh crore recapitalisation bond to be provided to NPA-hit state-run banks over two years to shore up capital, they said.

Parliament’s approval has been sought for “meeting additional expenditure towards recapitalisation of Public Sector Banks through issue of government securities”, said the finance ministry document. The additional expenditure of Rs 80,000 crore towards bank recapitalisation through issue of government securities will be matched by additional receipts on issues of securities to the banks and “will not entail any cash outgo”, it added.

Statutory Liquidity Ratio (SLR) is a portion of deposits that banks need to invest in government securities. The SLR status to any instrument provides traceability option and they can be traded in the secondary market. “These bonds will have non-SLR status, the official said, adding these bonds to be cash neutral for the government,” sources said.

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Asked by when the infusion would take place, the official said this would happen soon during this quarter. Interest payout and other aspect is looked at by the Department of Economic Affairs, the official added. Finance Minister Arun Jaitley in October had announced an unprecedented Rs 2.11 lakh crore two-year roadmap to strengthen PSBs, reeling under high non performing assets (NPAs) or bad loans. Their NPAs have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.75 lakh crore in March 2015.

The plan includes floating re-capitalisation bonds of Rs 1.35 lakh crore and raising Rs 58,000 crore from the market by diluting government’s stake.

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