The rub-off effect of this move, along with benign inflation forecast and slowing industrial growth, will nudge the RBI Monetary Policy Committee to cut interest rates further in the policy review next month.
The Centre Wednesday announced equity infusion of Rs 48,239 crore in 12 public sector banks in this fiscal to help them maintain regulatory capital requirements and to provide growth capital to better performing banks.
The NSSF collects funds through small savings schemes, such as Post Office Savings Account, National Savings Time Deposits, National Savings Recurring Deposits, National Savings Monthly Income Scheme. It is a costlier form of borrowing for the government as compared to market loans.
While SBI did not state the reasons for its planned loan sale through e-auction outside the IBC driven recovery, sources says delays in resolution under the bankruptcy law, along with clogged pipelines at various NCLT (National Company Law Tribunal) benches, are perhaps encouraging banks to look for outright sale.
One of the contentious issues in the conflict between the government and the RBI under Urjit Patel was the size of the central bank’s reserves, which at Rs 9.6 lakh crore was then perceived as being excessive by the government.
With the government facing financial constraints, the fund infusion is being done through issuance of recapitalisation bonds, on the lines of similar bonds being issued for capital infusion in public sector banks.
As there are 21.6 crore small and marginal farmers — most of whom are not in a position to repay the loan or put collateral — such a scheme is the only way to support their fund requirements, apart from ensuring market prices for their produce.