Finance Minister Proposes Rs 20,000 Crore Recapitalisation For Public Sector Banks

Finance Minister Nirmala Sitharaman on Monday said the government will infuse Rs 20,000 crore into public sector banks (PSBs) in 2021-22 to meet the regulatory norms. For the current financial year also, the government had made a provision of Rs 20,000 crore for recapitalisation. "To further consolidate the financial capacity of PSBs, further recapitalization of Rs 20,000 crores is proposed in 2021-22," she said while presenting the Budget 2021-22 in the Lok Sabha. During 2019-20, the government had proposed to make a Rs 70,000-crore capital infusion into the PSBs to boost credit for a strong impetus to the economy.

However, the government refrained from committing any capital for the PSBs in the Budget 2020-21, hoping that the lenders will raise funds from the market depending on the requirements. In September 2020, Parliament approved Rs 20,000 crore capital infusion for PSBs as part of the first batch of Supplementary Demands for Grants for 2020-21.

Of this, the government provided Rs 5,500 crore to Punjab & Sind Bank in November 2020, to meet the regulatory capital requirement. In 2017-18, the government had infused Rs 90,000 crore, followed by Rs 1.06 lakh crore in 2018-19.  The Finance Minister further said the government had approved an increase in the Deposit Insurance cover from Rs 1 lakh to Rs 5 lakhs for bank customers last year.

"I shall be moving amendments to the DICGC Act, 1961 in this Session itself to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover," she said.
This would help the depositors of banks that are currently under stress, she added.