Finance Minister Arun Jaitley Thursday said the government will infuse Rs 83,000 crore in public sector banks in the next few months of the current fiscal.
Earlier in the day, the government sought Parliament's approval for infusion of an additional Rs 41,000 crore in the state-owned banks through the second batch of Supplementary Demands for Grants.
This would enhance the total recapitalisation in the current fiscal from Rs 65,000 crore to Rs 1.06 lakh crore.
The recapitalisation, Jaitley told reporters, will enhance the lending capacity of state-owned banks and help them come out of the RBI's Prompt Corrective Action (PCA) framework.
Jaitley further said recognition of non-performing assets in the public sector banks is complete, and the downslide in bad loans has begun.
Out of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders.These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.
According to a report by credit rating agency ICRA, part of overall recapitalisation programme of Rs 2.11 trillion for PSBs, government has budgeted a capital infusion of Rs 65,000 crore for PSBs during FY19, of which it has already infused Rs 22,900 crore in seven PSBs till November 2018.
The balance capital of Rs 42,100 crore is expected to be allocated equally into PCA and non-PCA banks.
Though, the three public sector general insurance companies, United India Insurance,Oriental Insurance Company and National Insurance Company,require capital from the government urgently to achieve the required solvency ratio of 1.5 per cent, there has been no response from it so far.Officials from these general insurers point out that these companies together require over Rs 8,000 crore of capital to attain the required solvency ratio.
“We haven't even written to the government for capital as yet and woud rather wait for some positive indications from it before writing to them formally'' said a senior official of one of these companies adding that these companies have crores in dividend to the government over decades but never have received any funding from them.
Also PSU general industry can't be compared with that of PSU banks whose needs are really massive and has not been an one time affair, said officials. .
Currently, these companies have received special regulatory supports and some even special reinsurnace support from GIC Re to conduct their day to day business.
Since two of the companies, NIC, that had raised Rs 800 crore in 2017, and UII, that had raised Rs 900 crore in 2018, have already raised money from the market, that option may not be a viable one further.
The merger of these compamies is also on the cards, though no dead-line for completing the exercise is known yet.Though, the merger which was announced in the Budget 2018-19 by finance minister Arun Jaitley, was orginally expected to be completed by end of the current fiscal,in an after thought, the government put it in the back burner and instead decided to strengthen these companies before the merger and listing.
“But what are strategies to strengthen these companies are also not known as yet,'' said officials from these companies.
These three companies lost their mandatory solvency ratio after suffering huge underwriting losses, in 2016-17,for which they had to provide massively. IRDAI had asked these companies to provide adequately for the losses happened over years in the past.