Union financial services secretary GS Sandhu on Friday ruled out further fund allocation in the forthcoming Budget to recapitalise state-owned banks, indicating that Rs 11,200 crore earmarked in the Interim Budget presented on February 17 would be sufficient for banks in the current year.
Sandhu also said the government is likely to take a decision on a proposal to create a holding company structure for public sector banks before the Budget and a road map on the proposal is likely to be announced by the finance minister in the Budget.
When asked about the recapitalisation plan in the Budget, Sandhu said, “Not in this Budget. If there is any urgent requirement, the government is always there. The current thinking in the finance ministry is that banks have done much better in the last quarter and this year the performance will be even better. There has been an overall improvement in internal accruals and cash recoveries. SBI and some other PSU banks have also done well in NPA management in the last quarter.”
Sandhu said there is no pressure from the government on state-run banks to sell their non-core assets to raise capital. “There is no pressure (to sell non-core assets). We are just examining what all options are available to raise additional capital,” he told reporters here after attending the board meeting of the Life Insurance Corporation of India
“I am hopeful that by the Budget, we would have made up our mind on this (holding company structure),” Sandhu said, adding that the Budget would have a road map on it. The RBI-appointed P J Nayak Committee had called for lowering the government’s stake in public sector banks to 51 per cent to meet their capital requirements under Basel III norms and suggested setting up a holding company for all public sector banks.
Asked about a decision on the merger of State Bank of India subsidiaries, Sandhu said the government is examining the best way to go forward. “There is no time frame for this issue because there are so many issues which have to be gone into,” he said.