SBI chairman Rajnish Kumar says that by January, resolution plans for some of the 12 accounts referred for insolvency at NCLT should be in place as the six-month period ends. Photo: Mint
SBI chairman Rajnish Kumar says that by January, resolution plans for some of the 12 accounts referred for insolvency at NCLT should be in place as the six-month period ends. Photo: Mint

Govt to decide on capital allocation based on bank business plans: SBI chief Rajnish Kumar

SBI chairman Rajnish Kumar says banks are expected to work out their plans by 31 December, so that the finance ministry could calculate the order of funds prioritisation

Mumbai: The finance ministry will decide on the allocation of funds to state-owned banks under the recapitalisation programme once the lenders submit their respective business plans, Rajnish Kumar, chairman of State Bank of India (SBI) said on Friday.

“31 December is when banks are expected to work out their requirements, business plans. And once that happens, only then the ministry will have an idea of who needs and how much, and what should be the order of prioritisation," Kumar said on the sidelines of Asian Bankers Association Conference in Mumbai.

Last month, the finance ministry announced a Rs2.11 trillion bank recapitalisation plan for state-owned lenders weighed down by bad loans, seeking to stimulate the flow of credit to spur private investment.

Out of the total commitment, Rs1.35 trillion will come from the sale of so-called recapitalisation bonds. The remaining Rs76,000 crore will be through budgetary allocation and fundraising from the markets.

The recapitalisation plan comes at a time when Indian banks are facing the twin issue of lower credit growth and rising bad loans. Currently, banks are sitting on gross non-performing assets (NPA) worth Rs8.40 trillion, of which Rs7.34 trillion belongs to public sector banks.

Last week, public sector banks, in a meeting called by the department of financial services (DFS), deliberated on capital allocation, asset quality and credit growth. Here, banks had pitched for a differentiated lending structure to make state-run lenders more efficient.

DFS will examine these suggestions and is expected to come out with a blueprint to strengthen state-owned banks, according to bankers.

On the resolution of stressed assets, Kumar said that by January, resolution plans for some of the 12 accounts referred for insolvency at National Company Law Tribunal should be in place as the six-month period ends.

Upon admission of a petition at NCLT, a 180-day moratorium, extendable by another 90 days, begins to decide on a resolution plan. In case the account is not resolved, the company goes into liquidation.

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