Public sector banks have been wanting capital and the Finance Ministry has called for a meeting with the heads of the public sector banks on Friday.
The Reserve Bank of India (RBI) is batting for public sector banks, or PSBs, especially the small and non-performing ones that are burdened with high levels of bad loans and poor growth. CNBC-TV18 learns from sources that the RBI has written to the Finance Ministry urging them to increase capital infusion into the public sector banks.
In February of this year, the government had announced a capital infusion of Rs 7,940 crore for state-run banks, which is nearly half of what they require and lower than the amount the government had committed for fiscal year 2015. Even last year, of the promised Rs 11,200 crore, only Rs 6,990 crore capital was infused in selective banks, based on their performance parameter.
The Reserve Bank of India even in its monetary policy statement issued on June 2, had highlighted the need for targeted capital infusion of bank capital into scheduled public sector banks to ensure adequate capital flows to the productive sectors as investment picks up and to clean up stressed assets in their balance sheets.
The RBI has also asked the Finance Ministry to review capital allocation and urged them to more than double the amount that had been allocated for the fiscal initially. The heads of state-run banks and some private banks will be meeting the Finance Minister on June 12 for an annual review of the performance. Sources indicate that the PSU banks’ heads will begin making presentations to the government to pitch for their capital needs as early as next week.