Govt committed to infusing funds in PSU banks, says FM

The government will recapitalise the state-owned banks to help them tide over the problems arising out of slow economic growth, Finance Minister Pranab Mukherjee said in Mumbai on Saturday.

"Going forward if GDP growth slows down, there could be some impact on asset quality (of banks)," Mukherjee said while addressing an event organised by the Indian Merchant Centre in collaboration with ICAI.

He further said the government is committed to adequately capitalising the banks and helping them to meet the Basel III capital requirement norms. "Additional capital is required for meeting Basel III norms. However, sufficient cushion is available for the Indian banking system. The government is committed to infusing required capital in the PSBs," the minister said.

In his Budget for 2012-13, Mukherjee provided for a capital support of Rs 15,888 crore to public sector banks and financial institutions.

"The government is committed to protecting the financial health of Public Sector Banks (PSB) and financial institutions," he had said in his Budget speech.

The government has already infused more than Rs 20,000 crore in 2010-11 and Rs 12,000 crore in 2011-12 in various state-owned banks to help them maintain a capital adequacy ratio of more than 8 per cent.

High interest rates and lower economic growth has impacted the repayment capacities of borrowers, pushing up the NPAs of banks to Rs 1.27 lakh crore in the first nine months of 2011-12 fiscal.

Banks' bad loans stood at Rs 94,084 crore in 2010-11, Rs 81,813 crore in 2009-10 and Rs 68,220 crore in 2008-09.

The economic growth during 2011-12 slowed down to 6.9 per cent from 8.4 per cent a year ago. The growth for the current fiscal has been pegged at 7.6 per cent. (PTI)