A £750 million fresh equity has been provided by the government to six stressed state-run banks to help them meet the prescribed regulatory capital requirement and state its commitment to keep banks well-funded. The update was confirmed by financial services secretary Rajiv Kumar, who said, “Banks will not suffer due to shortage of regulatory capital. But we will monitor their functioning to ensure that they undertake clean, responsible and prudent business to enhance stakeholder value.”
Bank of India, IDBI Bank, Uco Bank, Bank of Maharashtra, Dena Bank and Central Bank of India have received equity through preferential issue of shares with two of them informing stock exchanges about the decision. Details of the monitoring plan are expected to be announced shortly. Finance Minister Arun Jaitley, while announcing a mega £21.1 billion recapitalisation plan, had warned of strict conditions being put in place to avoid a repeat of unbridled lending that has resulted in record non-performing assets (NPAs) for Indian banks.
It is also working on incentives to give to better performers. While the government decides the mode of recapitalisation of all state-run banks, it advanced release of funds to these six to help them meet their equity requirements and enable them to resume normal business. Uco bank informed stock exchanges that the finance ministry communicated its sanction for release of £137.5 million towards preferential allotment of equity shares.
