Budget Briefs: Growth capital for public sector banks

3 min read
  1. Finance Minister in the Budget 2019 speech has announced that the public sector banks(PSBs) will be provided with a capital infusion of Rs 70,000 crore.
  2. This bank recapitalisation is aimed at bolstering the capital base of the state-owned banks.It will also give a much-needed boost to the stressed banks who are under pressure owing to the rising Non-Performing assets(NPAs).
  3. This 70,000 crore recapitalisation amount is a small part of Rs 2.11 lakh crore that the government plans to give to the banking sector in the next few years.
  4. Further,the finance minister has also said that Indian banking sector saw Rs 1 lakh crore of NPA resolution and recovery of Rs 4 lakh crore through the Insolvency and Bankruptcy Code(IBC) mechanism in the last four years.
  5. The Finance Minister also noted that six PSU banks have already been brought out of the Prompt Corrective Action(PCA) framework.
  6. PCA is a process or mechanism to ensure that banks don’t go bust. Under it,RBI will put in place certain risk thresholds to assess,monitor, control and take corrective actions on banks which are weak and troubled.
  7. The minister has also said that the government had earlier initiated governance reforms in the banks like splitting the Chairman and Managing Director’s post and forming a Banks Board Bureau(BBB) for board level appointments.
  8. BBB is an autonomous body of the Government of India.It is tasked to (a)improve the governance of Public Sector Banks (b)recommend selection of chiefs of government owned banks and financial institutions and (c)to help banks in developing strategies and capital raising plans.