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Government unveils details of recapitalisation plan for public sector banks

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On January 24, 2018, Government provided details about the recapitalisation plan for Public Sector Banks (PSBs) that was announced in October 2017. The details were provided at a press conference held by Finance Minister Arun Jaitley, Finance Secretary Hasmukh Adhia, Economic Affairs Secretary Subhash Garg and Financial Services Secretary Rajiv Kumar.

Information related to PSB recapitalisation plan:

In a bid to revise growth of PSBs, Government will infuse Rs. 88139 crore capital in 20 public sector banks (PSBs) before March 31, 2018.Government unveils details of recapitalisation plan for public sector banks

  • Out of this amount, 80000 crore will be raised through recapitalisation bonds and Rs. 8139 crore will come in the form of budgetary support.
  • IDBI Bank will get the highest infusion – Rs 10610 crore.
  • These bonds would be issued in six tranches, will have a maturity period of 10-15 years and would be priced at 8%.
  • Along with this announcement, Government also unveiled ‘Enhanced Access and Service Excellence (EASE)’, a six-fold roadmap for reforms in PSBs.
  • The six pillars of EASE reform plan comprise customer responsiveness, credit off take, PSBs as Udyami Mitra, responsible banking, deepening financial inclusion and digitalisation, and developing personnel.
  • An independent agency will be hired to conduct a public survey of the PSBs’ performance on each of the pillars of EASE reform pla The results of the survey would be published annually.
  • Phased capital infusion under this plan would be dependent on individual banks’ performance.
  • Main objective behind recapitalisation plan is to help PSBs to cope up with the problem of bad debts and revive credit growth.

Top 5 recipients under PSB recapitalisation plan:

IDBI BankRs. 10610 crore
Bank of IndiaRs. 9232 crore
State Bank of IndiaRs. 8800 crore
UCO BankRs. 6507 crore
Punjab National BankRs. 5473 crore