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FinMin may stick to capital infusion plan for PSU banks
News:
- The Finance Ministry is expected to finalise infusion of about ₹54,000 cr. in the next few weeks to the public sector banks.
Important Facts:
2. The proposal to not curtail its capital infusion plan for this financial year comes even as state-owned banks would be needing lesser funds following the Reserve Bank’s decision to defer the deadline to meet Basel III norms by a year.
3. The RBI extended the deadline for meeting the CCB of 2.5%, under Basel-III norms, until March 2020, which according to rating agency Crisil could reduce the burden of PSBs by ₹35,000 crore this fiscal.
4. The CCB currently stands at 1.875 per cent and the remaining 0.625 per cent was to be met by March 2019, as per the earlier deadline fixed by the RBI.
Counter cyclical capital buffer: The countercyclical capital buffer is intended to protect the banking sector against losses that could be caused by cyclical systemic risks.
- It requires banks to add capital at times when credit is growing rapidly so that the buffer can be reduced when the financial cycle turns
5. After assessing the requirement of each bank, the ministry is expected to finalise capital infusion of about ₹54,000 crore soon.
6. Under the new dispensation, the capital infusion by the government in public sector banks (PSBs) for meeting the capital buffer norms would come down to around ₹15,000-20,000 crore.
7. Significance:
- The infusion would help improve banks’ financial health, and some banks would get necessary regulatory capital while others would get it for fuelling growth.
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