Recapitalisation: Public-Sector Banks Meeting Requirements On Their Own, Says Government
Banks have raised about Rs 69,000 crore, including Rs 10,000 crore of equity capital, from the market, says DFS Secretary.
The government maintains that the public sector banks have turned profitable, fared well during the pandemic and are meeting their capital requirements on their own.
With public-sector banks turning profitable and improving on most parameters, they have been able to gather confidence of investors and consequently raise money from the market, Debasish Panda, secretary, Department of Financial Services, said when asked if the government plans to infuse funds in state-owned lenders.
"Banks have gone to the market and raised about Rs 69,000 crore, including Rs 10,000 crore of equity capital. Therefore, the capital requirement is being met by the banks themselves," Panda said on Wednesday after the annual review of the performance of public sector banks.
In the first five months of this financial year, the banks are already in process of raising more than Rs 12,000 crore, he said, adding some of the fundraises are complete and some of the qualified institutional placements are underway.
State-run lenders have earned more than Rs 30,000 crore in net profit, capital adequacy is as high as almost 14% against the regulatory requirement of 10.875%, Panda said. Net non-performing assets have come down to 3.1% as against 9% two years ago, while gross NPAs have fallen from 15% to below 8% now, he said.
Finance Minister Nirmala Sitharaman, who chaired the annual review of the performance by public-sector banks, said that state-owned lenders have collectively performed well despite the pandemic.
"They have come out of the PCA, today they are able to show clear profits and individually two banks have done very well," she said. "They have also shown that they are now in a position to go to the market and raise monies for their growth capital requirement."
In the budget for 2021-22, the finance minister proposed to infuse Rs 20,000 crore into state-owned banks to further consolidate their financial health.
Sitharaman didn't commit any capital for public sector banks in the budget for previous fiscal 2020-21, hoping that the lenders will raise funds from the market depending on their requirements. But in September 2020, Parliament approved a Rs 20,000-crore capital infusion for the lenders as part of the first batch of Supplementary Demands for Grants for 2020-21.
Of this, the government provided Rs 5,500 crore to Punjab & Sind Bank in November 2020 to meet its regulatory capital requirement.
Key highlights from the press briefing of Sitharaman, Panda and Revenue Secretary Tarun Bajaj:
Performance
Collectively, public sector banks have done well.
Individually, some have performed well.
Even though they were going through the pandemic and implementing various government schemes, banks didn't let the amalgamation processes suffer.
Nothing to say on bank privatisation at the moment.
Lending To Export, Sunrise Sectors
PSBs asked to discuss future business with exporters and export industry bodies.
Emphasised the need for better credit flow to export and export-oriented companies.
Urged banks to work with state governments to support the One District One Product Scheme.
Asked banks to work with sunrise sectors to address their financial requirements.
Northeast
Requested banks for specific plans for the northeastern states.
Want to address the needs of each of these states, not looking for a single approach.
Banks have raised concerns that current account-savings accounts deposits are piling up in eastern states.
Banks must push for better credit expansion in these states.
Credit flow for business development in these regions must be promoted better.
Monsoon Impact
A little too much to safely assess the impact of monsoon.
See revival in the country, irrespective of rainfall.
Have asked banks to conduct a credit outreach programme this year in every district after October.
Inflation
The RBI has indicated that inflation should come down soon.
Reduced duties on a number of products such as edible oils and pulses.
The supply side has improved.
Estimate is that inflation will remain within the 4-6% band.
Insurance Mergers, Monetisation
Will ensure government's minimum presence in the insurance sector, across life, general and reinsurance.
Will look at amalgamation and monetisation of firms not part of this minimum presence.
The government will protect employees of these companies.
International Listing
Direct international listing is under discussion.
Needs amendments to some regulations.
Will see what can be done in the budget session.
Need to sort out issues on direct listing.
More Contribution To Pension Of Bank Staff
The finance minister approved enhanced pension contribution and payout by PSU banks under the eleventh bipartite settlement signed by the Indian Banks' Association.
The previous limit for pensioner's family was set at Rs 9,284 per pensioner.
Have removed the cap and implemented a uniform slab of 30% of the last-drawn salary.
Employer contribution to NPS raised from 10% to 14%.