Reserve Bank Governor Urjit Patel today said the planned Rs 2.11-trillion fund injection for state-run banks is not only a recapitalisation package but a strings-attached reform agenda.
In October, government had announced a Rs 2.11- trillion capital infusion into public sector banks weighed down by dud loans over the next two years. Of this, Rs 1.35 trillion will be through recapitalisation bonds a small portion of which will also come from capital markets, and the remainder Rs 76,000 crore will come from the budgetary support.
The Governor also said the central bank is working closely with the financial services department to finalise the extent of funding for each bank and the amount of recap bonds to be on banks' balance sheets as government's equity contribution.
He said the plan will be differentiated across banks as recap bonds will be front-loaded for entities that have managed their balance sheets more prudently and can use injected capital to lend, besides providing for legacy asset losses. Other banks will receive the government contribution based on their reform initiatives based on an efficiency drive, greater focus, and non-core asset sales.