The government on Wednesday said it has limited fiscal space to recapitalise PSU banks and they can raise funds from the market to meet their capital needs.
“The government doesn’t have space to give Rs 20,000 crore or 25,000 crore (for capital infusion) … If banks require further capital they have other means to raise capital including from raising capital from market,” Financial Services Secretary Hasmukh Adhia told reporters.
In Budget, Finance Minister Arun Jaitley had proposed infusing Rs 7,940 crore funds next fiscal in the public sector banks to enable them maintain adequate capital.
“We don’t have fiscal space and banks are adequately capitalised for the moment. There is no immediate need to raise funds from the market,” Mr. Adhia said.
For the current fiscal, the government had proposed capital infusion of Rs 11,200 crore. However, against that the government disbursed Rs 6,990 crore to 9 public sectors banks including SBI, BOB, PNB, Canara Bank and Indian Bank based on their performance.
In December 2014, the government had allowed PSU banks to raise funds from markets by diluting government holding to 52 per cent.
Government’s holding in 27 state-run banks range between 56 per cent to 84 per cent.
Out of 27 PSBs, Government of India controls 22 through majority holding. In the remaining 5 banks, state-run SBI holds majority stake.
Public sector banks require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms.