Government to pump in Rs 88,000 crore into 20 PSBs

The government has announced that it will infuse Rs 88,000 crore of capital into 20 state-run banks in the current fiscal, while also prescribing a reforms package. Of this, Rs 80,000 crore will be through recapitalisation bonds and Rs 8,139 crore as budgetary support. Banks will also be raising Rs 10,312 crore from the market. The package is going to have six themes with 30 action points.

Besides ensuring customer service levels and responsible banking practices, lenders will have to monitor loans, keep a close eye on bad debt and sell non-core assets.

"The reform agenda is aimed at EASE - Enhanced Access and Service Excellence - focusing on six themes of customer responsiveness, responsible banking, credit offtake, PSBs (public sector banks) as Udyami Mitra, deepening financial inclusion and digitalisation and developing personnel for brand PSB," the government said. "The overarching framework for the reforms agenda is Responsive and Responsible PSBs."

Specialised monitoring agencies will need to be set up by banks for loans above Rs 250 crore besides a separate vertical for non-performing assets (NPAs), apart from selling non-core assets and rationalising overseas businesses. They also need to have a minimum 10% exposure in consortium loans to prevent a situation in which too many lenders are involved when it comes to debt resolution.

Eleven banks that are currently under the Reserve Bank of India's prompt corrective action (PCA) programme because of their bad loan burden will together get Rs 52,311 crore to meet regulatory capital requirements while nine performing banks will get Rs 35,828 crore to allow them to pursue growth.