Indian two thousand and five hundred rupee banknotes. (Photographer: Dhiraj Singh/Bloomberg)

State-Run Banks May Get Rs 70,000 Crore Via Recap Bonds In FY18

The finance ministry may infuse about Rs 70,000 crore through recapitalisation bonds in the bad loan-hit public sector banks in the next four months, officials said.

Last month, Finance Minister Arun Jaitley had announced an unprecedented Rs 2.11 lakh crore two-year roadmap for strengthening public sector banks. The plan included recapitalisation bonds of Rs 1.35 lakh crore.

Currently, the government is in the process of finalising the structure of bonds and decision in this regard could be made by the end of this month.

The finance minister had said that there were multiple options before the government for recapitalisation bonds and they are being examined and the best ones would be explored.

Once the structure is in the place, the government would front load bond issuance and preliminary assessment indicates that it could be between Rs 70,000 and Rs 80,000 crore, the officials privy to the development said.

However, nothing has been finalised yet, the official sources said, adding that the finance ministry would get better picture of requirements of various banks after the second quarter results are out.

Non-performing assets of public sector banks alone have increased from Rs 2.75 lakh crore in March 2015 to Rs 7.33 lakh crore as on June 2017.

Besides recapitalisation bonds, the finance minister had announced that banks would get about Rs 18,000 crore under the Indradhanush plan over the next two years.

Under Indradhanush roadmap announced in 2015, the government had announced to infuse Rs 70,000 crore in state- run banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirement in line with global risk norms, known as Basel-III.

In the last three-and-half years, the government has pumped in Rs 51,858 crore capital in the public sector banks. Remaining Rs 18,142 crore would be pumped into banks over two years.