Weekly Current Affairs

Finmin revises criteria for recapitalisation of PSU banks [Economy]

  • State-owned banks looking forward to the next round of capital infusion will need to fulfil a new set of criteria, including credit recovery, as the Finance Ministry has revised the recapitalisation norms.
  • The second tranche of capital allocation for the current fiscal would be based on cost of operations as well as recovery and quality of credit on the basis of risk weighted assets.
  • Only those lenders that fulfil the criteria post third quarter (October-December) results of the current fiscal will be eligible for the second round of funding.
  • The money was allocated last fiscal on the twin principles of ensuring 7.5 per cent Common Equity Tier 1 (CET 1) at the end of the 2016 and growth capital to five major banks.
  • The government in July had announced the first round of capital infusion of Rs.22,915 crore for 13 banks.
  • 75 % of the amount is being released now to provide liquidity support for lending operations as also to enable banks to raise funds from the market.
  • Remaining amount will be linked to performance with reference to greater efficiency, growth of credit and deposits and reduction in cost of operations.
  • Finance Minister Arun Jaitley in his Budget speech for 2016-17 had proposed to allocate Rs.25,000 crore towards recapitalisation of PSU banks.