Recover NPAs if you want capital, government tells state-run banks

The Indian government will infuse capital in state-run banks but on one condition-recover NPAs.

The state-run banks are looking Rs 25,000 crore capital from the government, which has maintained that these banks should show some improvement in recovering non-performing assets (NPAs).

"We are holding consultations with banks on their growth projections, credit disbursement targets and other efficiency parameters such as low-cost deposits. Any capital allocation will be based on their overall performance," a finance ministry official told ET.

The NPAs of public sector banks jumped from 5.43% in March last year to 7.3% in December 2015.

"We are hopeful to get the bankruptcy law passed in this session of the parliament. In addition, we will introduce changes in SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) and DRT (debt recovery tribunal) laws to speed up the recovery process," the official further told ET.

Meanwhile, few banks have given presentations to the finance ministry and are hopeful of raising capital through other methods also.
"We are also looking to raise money by divesting some of our non-core assets. We have some investments, including that in the insurance sector where we may exit," a senior executive with Allahabad Bank told ET.

As per the finance ministry, state-run banks will need Rs 1.8 lakh crore of additional capital till FY 2019.