Essay on capital infusion for public sector banks

Govt may increase Rs 70,crore capital infusion for public sector banks Money The government last year announced a revamp plan, 'Indradhanush', to infuse Rs 70, crore in state-owned banks over four years, while they will have to raise a further Rs 1. Jan 24,

Essay on capital infusion for public sector banks

Going by the plan, Rs.

However, the financial sector is a major ly dominated by the Bankin Sector where the commercial banks comprise of 60 percent of total assets held by the financial system followed by Insurance Sector. In the first tranche of capital infusion during , the government had allocated Rs 22, crore in 13 public sector banks, of which Rs 16, crore or 75 per cent was given upfront. The Rs 11,crore capital infusion is part of the Rs 65, crore that the government propose to infuse into the 21 public sector banks this financial year. "The infusions are credit positive and will strengthen the banks' capitalisation," global rating agency Moody's said in a report today.

In the past 15 years, the Union government has infused more than Rs. In the current fiscal year, the budgetary allocation was Rs. For instance, the top post in public sector banks has been split between the non-executive chairman and managing director, but no chairman has been appointed as yet.

Some of the large banks today do not even have managing directors. At least on the recapitalization issue, the government has walked the talk. Now, the two key questions are: A Reserve Bank of India estimate put the capital requirement at Rs.

Banks need capital for two reasons: With a sharp drop in credit demand, the capital requirement is likely to come down. Clearly, the state-run banks need more capital.

Capital infusion plan good for Indian public sector banks: Moody's

Where would the money come from? So, there is enough scope to divest the government stake and raise money from the public. However, are investors excited about public sector bank stocks?

It does not seem so. Barring State Bank of India and Bank of Barodaall state-run banks are trading at a discount to their book value.

They are trading at between three-and-a-half and five times their book value. So, it will not be easy to sell public sector bank stocks in the market.

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If the rally is to be sustained, the government must address some of the fundamental issues and infuse right skills and expertise in these banks. In their absence, capital infusion alone is a band-aid solution to the problems.

He is also the author of Sahara: Email your comments to bankerstrust livemint. His Twitter handle is tamalbandyo First Published: Sun, Aug 09 Capital infusion in public sector banks intended to redeem large debt-ridden firms, says union AJ Vinayak T+ T-Related With State elections coming, banks .

The damage this is causing to public sector banks could be partially offset by giving them more capital. The government, which is also the biggest shareholder, can infuse capital in banks by either buying new shares or by issuing bonds.

The Rs lakh crore capital infusion into the banking sector will come over the next two years. The Finance Ministry is working on capital infusion strategy for the Public Sector Banks October 15, Admin The finance ministry is working on capital infusion strategy for the public sector banks (PSBs) and it is expected to be finalised by December, according to official sources.

Essay on capital infusion for public sector banks

The government’s plan to amalgamate the roughly two dozen public sector banks into six large institutions is part of its attempt to bolster the capital base of these lenders. The government's plan to recapitalize public sector bank by Rs trillion, will aid these banks to make provisions for bad loans, lend money to the corporate and retail sector and would help them in maintaining their Capital Adequacy Ratio (CAR) above the statutory minimum.

Capital Adequacy: A Financial Soundness Indicator for Banks followed by HDFC and Axis bank while Bank of India has the lowest. This made us conclude that private sector banks are in good position as compare to public banks in.

Public sector banks need capital infusion -Governance Now