Provide more capital to PSBs to deal with stressed assets: RBI

The Dollar Business Bureau 

Reserve Bank of India (RBI) had made a strong case to provide further capital to public sector banks (PSBs) in order to deal with the issue of stressed assets and get back to a situation from which they can begin creating internal accruals.

“Indian banks got into stress before implementation of Basel III and revised IFRS which provide protection against system level stresses...So we have to find more capital for supporting banks today. Of course government of India has supported entire AQR (asset quality review) exercise that we have done,” said N S Vishwanathan, Deputy Governor of RBI on Tuesday, while speaking at an ASSOCHAM event in New Delhi.

“The Government of India has been providing support and required capital to the PSBs. We need to make sure that the stressed assets build-up is restricted so that the banks get back to their earlier position and start generating adequate internal accruals,” Vishwanathan said.

He further said that the provision coverage ratio (PCR) has seen a drop in the past few months.

“PCR is said to be the difference between gross NPA (Non-Performing Asset) and net NPA that has to be covered if the net NPA is nil. This means that the assets are fully provided for,” he said.

The government, last month, had injected Rs.22,915 crore capital in 13 banks including State Bank of India and Indian Overseas Bank for reviving loan growth that reached a two-decade low, in order to support cash-strapped PSBs.

For the current financial year, this is the first tranche of capital infusion. The government would provide more funds in the future based on the performance of PSBs.