Bank recap: Govt to infuse Rs 88,139 crore in PSBs by March, monitor loans above Rs 250 cr

Finance Minister Arun Jaitley on Wednesday said the government has moved proposal to infuse additional grant of Rs 88,139 crore - Rs 80,000 crore through Recap Bonds and Rs 8,139 crore as budgetary support - for 2018 under the public sector banks recapitalisation plan. Jaitley said the government last year announced the capital infusion plan to pump in Rs 2.1 lakh crore in PSBs - burdened under huge Non-Performing Assets (NPA) - in the course of two years (FY18 and FY19). 

"The government has a prime responsibility of keeping the PSBs in good health. We inherited a major problem, and are committed to find solutions. Now the government's job is to create an institutional mechanism to ensure what happened in past is not repeated," he said, indicating a huge burden of Non-performing Assets (NPAs) under which the PSBs are reeling. The Finance Minister said various steps will be taken to ensure the banks follow the highest standard of governance in future, and that the bank recapitalisation is first such exercise in the extensive reform plan.

The recapitalisation initiative will be accompanied by a strong reforms package across six themes incorporating 30 action points. Major agendas under the action plan are Enhanced Access and Service Excellence (EASE) focusing on six themes of customer responsiveness, responsible banking, credit off-take, PSBs as Udyami Mitra, deepening financial inclusion and digitalisation and developing personnel for brand PSB.  

FOLLOW-UP IN LOANS ABOVE Rs 250 CRORE

A strict watch will be kept on the PSBs' lending and recovery systems to ensure clean consortium loans with only 10 per cent exposure. The PSBs will have to keep in mind they follow a rigorous process for corporate lending and make post-sanction follow-ups in loans above Rs 250 crore. In addition to flagging loan defaults in time, the PSBs will initiate stringent loan recovery methods.

REPORT CARD ON COMPLIANCE

Department of Finance Secretary Rajeev Kumar said the government will make sure once capital infusion happens, the necessary compliance standards are followed to make the banks strong, professional and accountable institutions. Under these standards, the government will not interfere in commercial decisions of banks. There will continuous efforts to strengthen bank boards in addition to theme-wise reform implementation assigned to whole-time directors of these PSBs. Reputed independent agencies will evaluate and rank PSBs every year to make them more accountable on different parameters, which could spur competition and transparency among the banks, said Kumar, adding that the survey results will be made public every year.

UDYANMITRAS FOR MSMES

Rajeev Kumar said unlike rumours on social media about risk to depositors' money, the government is making sure no PSB fails. They are not getting any corporate loan waiver and large default cases have been referred to the NCLT, said Kumar. Kumar said the government has put a special focus on the Micro Small and Medium Sector by providing credit support and easy application loan facility. On UdyanMitra, decision on a loan application will be taken in 15 days, and GST-registered MSMEs will be able to avail enhanced working capital.

BANK-WISE CAPITAL INFUSION

With the capital infusion of Rs 10,610 crore, IDBI Bank is the biggest beneficiary of the recapitalisation plan followed by Bank of India (Rs 9,232 crore) and the State Bank of India (Rs 8,800 crore). UCO bank will receive Rs 6,507 crore; Punjab National Bank - Rs 5,473 crore; Bank of Baroda - Rs 5,375 crore; and Central Bank of India - Rs 5,158 crore.

Here's the full list of the beneficiary banks.

1. IDBI Bank: Rs 10,610 crore

2. Bank of India: Rs 9,232 crore

3. SBI: Rs 8,800 crore

4. UCO Bank: Rs 6,507 crore

5. PNB: Rs 5,473 crore

6. BoB: Rs 5,375 crore

7. Central Bank: Rs 5,185 crore

8. Canara Bank: Rs 4,865 crore

9. IOB: Rs 4,694 crore

10. Union Bank: Rs 4,524 crore

11. OBC: Rs 3,571 crore

12. Dena Bank: Rs 3,045 crore

13. Bank of Maharashtra: Rs 3,173 crore

14. United Bank: Rs 2,634 crore

15. Corporation Bank: Rs 2,187 crore

16. Syndicate Bank: Rs 2,893 crore

17. Allahabad Bank: Rs 1,500 crore

18. Vijaya Bank: Rs 1,277 crore

19. Punjab and Sind Bank: Rs 785 crore

20. Andhra Bank: Rs 1,890 crore