Announcing the Union Budget 2016, the Finance Minister, Arun Jaitley, has allocated Rs 25,000 crore towards the recapitalisation of high-levels of non-performing assets or bad debts of state-run banks in the next fiscal.
The minister also proposes to provide Rs 25,000 crore capital each in the current and next fiscal years, while Rs 20,000 crore would be provided during 2017-18 and 2018-19.
In July last year, the government presented to parliament a supplementary demand for grants to provide for Rs 12,000 crore towards recapitalisation of public sector banks (PSBs).
This year, the amount of Rs 25,000 crore is being provided through three tranches.
As per the Ministry of Finance, “Around 40 per cent of the amount is to be given to those banks which require support, and all PSBs will be brought to the level of at least 7.5 per cent core capital by the end of fiscal 2016.”
In the second tranche, 40 per cent of the capital is to be allocated to banks, namely Bank of Baroda, Bank of India, Canara Bank, IDBI Bank, Punjab National Bank and State Bank of India.
The remaining 20 per cent is to be allocated to the banks based on their performance during the three quarters in the current year.