Perform, if you want capital: Government to banks | business | Hindustan Times
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Perform, if you want capital: Government to banks

Banks may need to rejig structurally to get govt aid; others will have to raise money from markets.

business Updated: Jul 02, 2015 23:32 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times

The finance ministry has indicated that it would provide a higher share of recapitalisation funds only to those public sector banks which have managed to show impressive growth and are able to clearly project a roadmap for enhancing business.

Banks, which fail to show impressive growth, would get lesser share of capital injection and they would be required to put their house in order.

“The government would inject capital but banks also on their part need to show what their business plans are and that funds would be spent judiciously especially as it is primarily the tax payers’ money. So there could be a few banks that would need to reorganise themselves before being eligible for recapitalisation,” an official source hold HT.

Others, meanwhile, will have to look to the stock markets to raise funds, which is what many state-owned banks are likely to do this financial year.

Sources said that the government has asked lenders to explore the opportunity to raise resources from the market. State-owned banks can dilute upto 49% stake while the remaining 51% will remain with the government.

“The banks can come up with the plans to hit the market, the government has facilitated that,” the source added.
The government has also directed state-owned banks to hive off their non-core businesses which include insurance and mutual funds to raise resources.

Each bank will present its own plan on this, which will be part of the overall recapitalisation exercise of banks.

In 2014-15, an amount of Rs11,200 crore was provided for recapitalisation. However, the government disbursed only Rs6,990 crore to nine state-owned banks based on their performance.