New Delhi: The centre’s move to recapitalise public sector banks (PSBs) has resulted in a surge in credit growth, a sign of revival of private sector investment in the country, a top finance ministry official said on Saturday.
Financial services secretary Rajiv Kumar said the banking sector posted a double digit growth on year-on-year basis in December 2017. “Surge in credit growth: Sustained momentum post PSB recap decision - Banking sector posts double digit (10.7% Y- o-Y) growth in Dec’17, up from (7.2% Y-o-Y) in Oct’17, powered by #services & #retail,” Kumar tweeted.
Earlier this week, Parliament gave its approval for issuance of Rs80,000 recapitalisation bonds to PSBs to improve their balance sheets so that their lending capacity is enhanced. Besides, the finance ministry approved proposal for infusion of Rs7,577 crore in six weak public sector banks as part of the recapitalisation plan to bolster capital adequacy ratio.
All these banks, which got capital support, are under prompt corrective action of the Reserve Bank of India (RBI). The funding comes under Indradhanus plan of the government which promised Rs70,000 crore over a period of four years ending March 2019. Lenders, which will receive capital through preferential issue of shares, include Bank of India, IDBI Bank and UCO Bank.
The actual fund infusion will take place in the next few weeks after they get necessary regulatory approval, including nod from shareholders. Finance minister Arun Jaitley in October had announced an unprecedented Rs2.11 trillion two-year road map to strengthen PSBs, reeling under high non performing assets (NPAs) or bad loans.
Their NPAs have increased to Rs7.33 trillion as of June 2017, from Rs2.75 trillion in March 2015. The plan includes floating re-capitalisation bonds of Rs1.35 trillion and raising Rs58,000 crore from the market by diluting government’s stake. In the last three-and-a-half years, the government pumped in Rs51,858 crore capital in the PSBs.