State-run banks will tap the market to raise Rs 1.10 lakh crore in next few years, as the government has decided to infuse Rs 70,000 crore towards their recapitalisation, said finance minister Arun Jaitley on Wednesday.
As per the finance ministry’s calculations, Rs 1,80,000 crore would be required by the government banks in the next three years, over and above the average profits they make.
Replying to a debate on Supplementary Demand for Grants in Lok Sabha, Jaitley said that the government will infuse Rs 70,000 crore in public-sector banks by 2018 making them healthier to finance economic growth.
“In adverse situation we can touch 8% (GDP growth rate) if banks are recapitalised, GST implemented, stalled projects revived and infrastructure spending improves,” Jaitley told the house.
In the current financial year, Rs 25,000 crore would be pumped into the banks, of which Rs 10,000 crore would go to the top six banks including State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank.
“The increase in the allocation has been made as the fiscal situation of the country is looking comfortable and it was indicated earlier also that a larger sum would be sanctioned if things looked brighter,” a senior government official said.
Out of the remaining Rs 15,000 crore, a sum of Rs 10,000 crore will go to the lenders that need financial support while the remaining Rs 5,000 crore would be infused into those banks which show healthy improvement in performance. Meanwhile, the government has also asked banks to identify non-core assets which could be either hived off or monetised to garner capital.
Bad loans of public sector banks stood at 5.2% of total advances in March 2015 compared to 4.72% in March 2014. Several banks saw a drop in profits in the first quarter ended June 30 due to higher provisioning for bad loans.