New Delhi : The Ministry of Finance is likely to issue the first tranche of recapitalisation bonds to public sector banks (PSB) in early January, official sources from the ministry confirmed to the ANI.
The recapitalisation bonds will not be sold in the open market and will be issued to all banks. Apart from this, the government will also infuse capital worth Rs 8,000 crore on the basis of performance. The union government plans to infuse Rs 76,000 crore by giving it space in its budgetary allocation and through the markets, and the remaining Rs 1.35 lakh crore by issuing recapitalisation bonds.
Earlier, in October, Union Finance Minister Arun Jaitley had announced the unprecedented PSU bank recapitalisation programme, of Rs 2.11 lakh crore. “To improve the lending capacity of the banks, we have announced the recapitalisation programme, which is essential to increase public spending on infrastructure, and that expenditure on infrastructure,” Jaitley had said. He had also maintained that there was a need to increase public investment for which bold steps will be taken by the government. The recapitalisation plan amounts to roughly 1.3 per cent of GDP.
In November, an International Monetary Fund (IMF) statement said that, “…India’s key banks appear resilient, but the system is subject to considerable vulnerabilities. Stress tests show that the while largest banks are sufficiently capitalized and profitable to withstand a deterioration in economic conditions, a group of public sector banks (PSBs) are highly vulnerable to further declines in asset quality and higher provisioning needs. Capital needs range from 0.75 percent of GDP in the baseline to 1.5 percent of GDP in the severe adverse scenario…”
