The Centre will infuse Rs 11,200 crore in nationalised banks in the next financial year to bolster their tier-1 capital after provisions for bad loans have been rising.
In his interim budget, finance minister P. Chidambaram admitted that banks are facing pressure on account of rising non-performing assets (NPAs). “Bankers have assured me that as the economy turns, they will be able to contain the non-performing assets and recover loans,” said the finance minister.
Experts and bankers, however, feel the announcement may not be enough. “Last year’s figure could not fulfil the requirements of banks; even the current number looks too low,” said the chairman of a public sector bank.
Recently, United Bank of India, with the highest gross NPA ratio of 10.82% in the country, said that it was looking to raise tier-1 capital worth Rs 1,000 crore.
Similarly, Central Bank of India and Andhra Bank said they will require Rs 2,000 crore and R800 crore, respectively, in the next financial year to improve their capital adequacy ratios and loan growth.