The finance ministry had in October announced an unprecedented Rs2.11 trillion PSU bank recapitalisation plan, Rs1.35 trillion of which will be raised through recapitalisation bonds. Photo: Mint
The finance ministry had in October announced an unprecedented Rs2.11 trillion PSU bank recapitalisation plan, Rs1.35 trillion of which will be raised through recapitalisation bonds. Photo: Mint

PSU banks may get Rs70,000 crore via recapitalisation bonds in 2017-18

The government is in the process of finalising the structure of recapitalisation bonds, to be issued as part of the PSU bank recapitalisation plan, and a decision in this regard could be made by November-end

New Delhi: The finance ministry may infuse about Rs70,000 crore through recapitalisation bonds in the NPA-hit public sector banks in the next four months, people aware of the matter said. Finance minister Arun Jaitley had in October announced an unprecedented Rs2.11 trillion PSU bank recapitalisation plan, Rs1.35 trillion of which would be raised using recapitalisation bonds.

The government, at present, is in the process of finalising the structure of recapitalisation bonds and a decision in this regard could be made by the end of this month. The finance minister had said that there were multiple options before the government for recapitalisation bonds and they are being examined and the best ones would be explored.

Once the structure is in the place, the government would front load bond issuance and preliminary assessment indicates that it could be between Rs70,000 and Rs80,000 crore, the people quoted above said. However, nothing has been finalised yet, they said, adding that the finance ministry would get better picture of requirements of various banks after the second quarter results are out.

Non-performing assets (NPAs) of public sector banks alone have increased from Rs2.75 trillion in March 2015 to Rs7.33 trillion as on June 2017. Besides recapitalisation bonds, the finance minister had announced that banks would get about Rs18,000 crore under the Indradhanush plan over the next two years.

Under the Indradhanush plan announced in 2015, the government had announced Rs70,000 crore capital infusion in PSU banks over four years while they will have to raise a further Rs1.1 trillion from the markets to meet their capital requirement in line with global risk norms, known as Basel-III.

In the last three-and-half years, the government has pumped in Rs51,858 crore capital in the public sector banks. Remaining Rs18,142 crore would be pumped into banks over two years.

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