Re-capitalisation for Responsive & Responsible PSBs

Last Updated on March 22, 2018 by Bharat Saini

Re-capitalisation of Public Sector Banks (PSBs) and Comprehensive Reform Plan unveiled by the Government of India on 24 January 2018, includes Rs.80000 crore through Recap Bonds and Rs.8139 crore as budgetary support to address regulatory capital requirement of all PSBs and provide a significant amount towards growth capital for increasing lending to the economy.

PSB Manthan held in November, 2017 involving senior management of PSBs and representatives from Government had recommended EASE – Enhanced Access and Service Excellence, focusing on six themes of customer responsiveness, responsible banking, credit off take, PSBs as Udyami Mitra, deepening financial inclusion & digitalisation and developing personnel for brand PSB. 

“Responsive and Responsible PSBs” is the overarching framework of reforms agenda.

• Capital infusion by Government is contingent on performance of PSBs on reforms.
• PSBs’ Whole Time Directors to be assigned theme wise reforms for implementation to be evaluated by the bank Boards.
• A survey by an independent agency in respect of EASE to be conducted to measure public perception about improvements in access and service quality.  Results of the survey to be made public each year.
• Recap & Reform agenda:
  • is sharply focused on strengthening PSBs,
  • increasing lending to MSMEs and
  • making it easier for MSMEs and retail customers to transact as well as significantly increasing access to banking services.
  • includes a commitment to banking services within 5 kms of every village,
  • refund within 10 days of any unauthorised debit in electronic transactions,
  • a mobile App  for locating banking outlets and
  • a mobile ATM in every underserved district.

This is part of PSBs Recapitalisation plan announced on 24 October 2017 when Government decided to take a massive step to capitalise PSBs in a front-loaded manner, with a view to support credit growth and job creation:

• That entailed mobilization of capital, with maximum allocation in the current year, to the tune of about Rs. 211000 crore over the next two years, through budgetary provisions of Rs. 18139 crore, recapitalisation bonds to the tune of Rs. 135000 crore, and the balance through raising of capital by banks from the market while diluting government equity (estimated potential Rs. 58,000 crore).
• Definite steps to be taken to enable PSBs to play a major role in the financial system. PSBs having 70% market share in the banking space to be geared for greater growth and to contribute through enhanced credit off-take.
• MUDRA Protsahan’ campaign across the country.
• Strong push on enabling growth of MSMEsthrough enhanced access to financing and markets, and a drive to finance MSMEs in 50 clusters.