Cash inflows may help govt recapitalise public banks
Over ₹4 lakh crore has been deposited in banks as of November 14. Government banks need ₹1.8 lakh crore by 2018-19 for recapitalisation, of which the government had committed to provide ₹70,000 crore in the next four yearsbusiness Updated: Nov 17, 2016 11:54 IST
The country’s banks that are struggling to cope with the serpentine queues of customers for the past week will finally have reasons to cheer. The huge surge in deposits due to demonetisation will help the government recapitalise public banks.
Over ₹4 lakh crore has been deposited in banks as of November 14. Government banks need ₹1.8 lakh crore by 2018-19 for recapitalisation, of which the government had committed to provide ₹70,000 crore in the next four years.
Sources said even if the banks retain 25% of the amount, the recapitalisation exercise will be taken care of.
“The exercise will have a huge impact on the recapitalisation of all banks ... though this was not taken into account until now, the deposits will help lenders,” a senior official at a state bank, requesting anonymity told Hindustan Times.
Banks have had to slow down lending with the rise in NPAs and eroding bottomlines.
“We will have to see how much of the money (deposits) is retained in the system, but whatever it is, it will definitely help in the recapitalisation of public sector banks,” said Nirupama Soundarajan, senior fellow, Pahle India Foundation.
The economic survey this year stressed the urgent need to clean up the balance sheets of government banks. Sources said the government was slated to review the recapitalisation requirement in the end of December.
The government has infused ₹22,915 crore into 13 public sector banks this year. Finance minister Arun Jaitley earlier said depending on the credit demand and the NPA level, the government will infuse more money.