Higher capital infusion in PSU banks unlikely: Banking Secy

Written By Unknown on Rabu, 04 Juni 2014 | 12.44

A steep rise in bad loans has eroded the capital base of most state-owned banks. However, the government is not in a position to provide adequate capital to these banks given the precarious state of its own finances.

Banking Secretary G S Sandhu Wednesday said there was little scope for allocating more funds to recapitalize state-owned banks. In an interaction with CNBC-TV18's Latha Venkatesh and Reema Tendulkar, Sandhu said the Rs 11,200 crore allocated in the Vote on Account would be sufficient.

A steep rise in bad loans has eroded the capital base of most state-owned banks. However, the government is not in a position to provide adequate capital to these banks given the precarious state of its own finances.

Sandhu is of the view that state-owned banks should start disinvesting some government equity.

He said the government may have to cut its shareholding below 58 percent in some banks.

The Finance Ministry is mulling a Bill for holding company structure for public sector banks, as recommended by the PJ Nayak Committee on bank governance.

Also Read: Govt mulls transfer of all PSU banks equity into holding co

If the Bill is passed, the government can transfer all PSU bank equity into the holding company called Bank Investment Company.


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