1 min read.Updated: 20 Nov 2019, 04:32 PM ISTIshita Guha
To ease liquidity concerns and boost lending activity, Nirmala Sitharaman in August had announced an upfront capital infusion of ₹70,000 crore
The move was expected to generate an additional lending and liquidity in the financial system
The government has so far infused ₹60,314 crore in public-sector banks of the total of ₹70,000 crore that was announced for these banks as part of the stimulus package to revive growth, Minister of State for Finance Anurag Singh Thakur said in the Rajya Sabha on Wednesday.
To ease liquidity concerns and boost lending activity, Finance Minister Nirmala Sitharaman in August had announced an upfront capital infusion of ₹70,000 crore in state-owned banks via recapitalisation bonds.
The move was expected to generate an additional lending and liquidity in the financial system to the tune of ₹5 lakh crore, Sitharaman had said in a press conference following the announcement.
Sitharaman, in her maiden Budget on 5 July, had first proposed a capital infusion ₹70,000 crore in public-sector banks in two phases. First, banks were to subscribe to bonds floated by the government and in the second phase, the government was to infuse the money into these banks.
With banks facing liquidity and lending issues that had a cascading effect on non-banking financial companies, auto and real estate sectors adding to the woes of a slowing economy, the government decided to change its plan and instead release the allocated money all at once.
The Budgetary capital allocation of ₹70,000 for the current fiscal is lower than ₹1.06 lakh crore announced for public-sector banks for 2018-19. The amount is also smaller than ₹88,139 crore injected during 2017-18. The government has infused ₹2.5 lakh crore in state-run banks since 2014-15.
Thakur said banks estimate their capital requirements based on all sources of capital, including the government, other investors, capital receipts from sale of assets and internal accruals.
“In addition to the projected infusion of ₹70,000 crore by the government, banks have projections and plans for mobilising capital from other sources as well," Thakur said in a written reply in the Rajya Sabha today.