Home >industry >Banks will not get easy money under recapitalisation plan: Banking secretary
Financial services secretary Rajiv Kumar. Photo: Pradeep Gaur/Mint
Financial services secretary Rajiv Kumar. Photo: Pradeep Gaur/Mint

Banks will not get easy money under recapitalisation plan: Banking secretary

Banking secretary Rajiv Kumar says banks will have to push for banking reforms, and that contours of the Rs1.35 trillion recapitalisation bonds are being finalized at the finance-minister level

Gurugram: Banking secretary Rajiv Kumar on Sunday said public sector banks are not going to get easy money as part of the Rs2.11 trillion PSU bank recapitalisation plan, and pushed them to move ahead with banking reforms.

Speaking after the first “PSB Manthan" in Gurugram, Kumar said the Rs1.35 trillion recapitalisation bonds will be front-loaded and the contours of the bonds are being decided at the level of the finance minister. The banks will also be getting nearly Rs18,000 crore under the Indradhanush plan.

“Everything is linked to the (banking) reforms which each board will consider within a short time as to what kind of business and how they want to go ahead. It’s not an easy money which is going to come, that is the main point. It has to be followed with a whole lot of reforms," the banking secretary said. The banking reforms also include bank boards taking a stand and coming up with a clear plan on consolidation, added Kumar.

According to Kumar, the bank recapitalisation does not come on its own as it is followed and preceded by a whole lot of reforms. As for the proposed recapitalisation bonds, he said the plan is to front-load them, meaning most of it would happen in the current year.

Giving details on the PSB Manthan, which was attended by top officials of public sector banks and financial institutions, Kumar said discussions took place on banking reforms, including strengthening of bank boards, resolution of non-performing assets (NPAs) and human-resource issues.

When asked about credit growth, Kumar said banks have put forth suggestions in this regard at the meeting. Banks are preparing themselves for credit offtake, he said, given the strong fundamentals of the Indian economy and economic growth getting back on track in the coming months.

While announcing the PSU bank recapitalisation plan in October, finance minister Arun Jaitley had said it would be accompanied by banking reforms to enable the lenders to play a major role in the financial system and give a strong push to the job-creating MSME sector.

Under the Indradhanush plan introduced in 2015, the government had announced capital infusion of Rs70,000 crore in PSU banks spread over four years to meet their capital requirements in line with global risk norms, known as Basel III. As per the plan, PSBs were given Rs25,000 crore in 2015 -16, and a similar amount has been earmarked for the following years. Besides, Rs10,000 crore each would be infused in 2017 -18 and 2018-19.

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