The government will go ahead with a plan for some consolidation of state-run banks after their recapitalisation, which is currently underway, and strengthening is done, Finance Minister Arun Jaitley said.
“We have now undertaken this exercise of recapitalisation of banks within the existing resources. I am trying to find additional resources for that purpose, to strengthen the banks. Once they are strengthened, I am going for consolidation of some of the banks,” he said at an International Finance Corporation (IFC) event here.
Continuing government efforts to deal with the high levels of non-performing assets (NPAs), or bad debts, of state-run banks, Jaitley had, in his February union budget, allocated Rs.25,000 crore towards their recapitalisation in the current fiscal.
He has provisioned to provide Rs.25,000 crore capital each during 2015-16 and the current fiscal, while Rs.20,000 crore would be provided during 2017-18 and 2018-19.
In July last, the government had presented to parliament a supplementary demand for grants to provide for Rs.12,000 crore towards recapitalisation of public sector banks (PSBs).
As per estimates, PSBs would need additional capital of up to Rs.240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.
The quantum of exposure of Indian scheduled banks in terms of gross non-productive assets, re-cast loans and write-offs was Rs.9.5 lakh crore as of September last year.
The government earlier this year named former comptroller and auditor general Vinod Rai the first chairman of the Banks Board Bureau that will give advice on how to recover the bad loans of state-run banks.
The members co-opted to the board are Anil K. Khandelwal, former chair of Bank of Baroda, H.N. Sinor, former joint managing director of ICICI Bank and Rupa Kudwa, former managing director and chief executive of Crisil