The recent announcement of a plan for infusion of money to the Public Sector Banks (PSBs) is certainly hopeful.
This is done in order to strengthen the balance sheets of the PSBs as there are very few ways to resolve the matter. A few days ago, Pawan Bajaj, Managing Director and CEO, United Bank of India, told BE that PSBs are able to maintain positive operating profits. The main issue is that a considerable portion of our fund has become nonperforming assets (NPA) and is not coming to our assets. Besides, there are problems of stressed assets. In this situation the entire health of PSBs depends on how much NPA is recovered in future.
Recapitalisation
The announcement of the infusion package of ₹ 2.11 lakh crore consists of three sources. One, ₹ 18,000 crore will be from budget provision. Second, the banks will raise ₹ 58,000 crore over the next two years by selling their shares. Third, government on its own would issue ₹ 1.35 lakh crore by issuing “recapitalisation bonds” over the current and next financial years. But out of these three parts, the first two are not new as these are already in the so called Indradhanus package which was declared earlier. The third one is new in the announcement.
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