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Finance Ministry plans to give Rs 12,000 crore to PSBs to deal with NPAs

14 Jul 2015 Evaluate

The Finance Ministry is reportedly planning to give Rs 12,000 crore to state-owned banks overloaded with bad loans. This new money will be an addition to the Rs 7940 core that was assigned in the budget for capitalization.

The ministry has said that the initiative was to support the banks that were struggling on account of rising bad loans, restructuring of accounts and also to help them grow their balance sheet. The ministry has sought details from all public sector banks (BSBs) on capital infused in the last decade and dividends they granted to the government. The government is likely to infuse the money in two parts. Out of the total Rs 20,000 crore, a portion will be given to banks that have urgent requirements, while the rest will only be allocated by March 2016.

Beneficiaries in the first infusion will include Syndicate Bank, Central Bank of India and Allahabad Bank.  As per the finance ministry, the PSBs will require Rs 2.40 lakh crore as equity by 2018 to conform to Basel III norms.

Earlier, Reserve Bank of India governor Raghuram Rajan had stated that banks should have enough capital so that they can use a part of it for cleaning up their balance sheets. He had also said that the way to get out of financial stress was to address the problem early... and some of the banks might need some capital to do that.

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