Cut costs to get funds, banks told

NEW DELHI: Cash-starved public sector banks, many of which have registered losses and arise in the bad assets in the previous quarter, have been asked to cut down

NEW DELHI: Cash-starved public sector banks, many of which have registered losses and arise in the bad assets in the previous quarter, have been asked to cut down operational costs in order to be eligible for recapitalisation.

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These banks have also been told increase low-cost deposits or the current account and savings account (CASA). According to the Reserve Bank of India, CASA deposits of public sector banks declined in 2014-15 over the previous fiscal.

The finance ministry is keeping an eye on the progress of government banks after they reported a combined net loss of ₹18,000 crore for the previous financial year.

“We have asked the banks to reduce their costs, simultaneously focussing on recovery of non-performing assets,” a senior government official told HT.

The state-owned banks will be required to send their progress reports to the government on a regular basis.

The government has announced infusion of ₹22,915 crore into 13 public sector banks including the State Bank of India (SBI), Punjab National Bank (PNB) and Indian Overseas Bank (IOB) among others as part of its four-year ₹70,000- crore re capitalisation exercise dubbed the Indradhanush programme.

Till now, only 75% of there capitalisation amount has been disbursed to the respective banks. The remaining amount will be given to them only if they adhere to their targets and projections.

The gross NPA—loans that do not yield returns — stood at 7.7% as on March 31, 2016. This ratio may go up to 8.5% in a year, according to RBI.