Finance ministry asks banks to submit business plans

Finance ministry asks banks to submit business plans
Highlights

Pursuant to public sector banks\' revamp plan, Indradhanush, Finance Ministry has asked NPA-laden state-run lenders to present their business plans to understand their incremental capital requirement following the RBI directives to clean up their books.

Mumbai: Pursuant to public sector banks' revamp plan, Indradhanush, Finance Ministry has asked NPA-laden state-run lenders to present their business plans to understand their incremental capital requirement following the RBI directives to clean up their books.

Some banks have already made their presentations to the North Block and the remaining are being called in now. The Indradhanush plan envisages Rs 70,000 crore of capital infusion over the next four years.

Of this Rs 25,000 crore each will be infused in FY16 and FY17 and Rs 10,000 crore each in FY18 and FY19.The government estimates that state-run lenders would require Rs 1.8 trillion over the next four years. Banks will have to raise the balance Rs 1.10 trillion from the market.

But the calculation has changed after RBI identified top150 defaulters and asked banks to make provisions for those accounts and clean their books by March 2017.

Following this, the banks are demanding higher capital infusion from the government as they are unable to raise funds from the market in prevailing conditions, wherein their stocks are trading on an average almost 60 per cent below their March, 2015 high, and also as higher provisioning norms have left them cash starved.

Under Indradhanush, the government had already infused Rs 20,088 crore into 13 public sector banks last September and the remaining Rs 5,000 crore would be given in the March quarter looking at the performance in the first nine months.

"Due to this additional provisioning our capital adequacy will be impacted and to maintain it we will require capital from the government," a senior public sector banker told PTI.

Higher provisioning norms are going to impact banks profitability over the next few quarters.

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