Centre injected Rs.22,915 cr into 13 public sector banks

In a bid to boost credit growth in the economy, the Centre has announced a sum of Rs.22,915 crore for recapitalisation of 13 public sector banks. State Bank of India (SBI) will receive the largest allocation of Rs.7,575 crore. Indian Overseas Bank and Punjab National Bank are to get Rs.3,191 crore and Rs.2,816 crore respectively.

• The infusions required in the current year were assessed from the Compound Annual Growth Rate(CAGR) of credit growth for the last five years and the banks’ projections of credit growth. The potential for growth of each these banks was also factored in.

Background:

In the Union Budget, the Centre had allocated a total of Rs.25,000 crore for the capitalisation of public sector banks in the current financial year 2016-17, in line with the infusion plans announced under the umbrella scheme “Indradhanush” introduced last year. The plan proposes infusions adding up to Rs.25,000 crore in 2015-16 as well as in 2016-17, followed by Rs.10,000 crore each in 2017-18 and 2018-19.

What is Mission Indradhanush?

Mission Indradhanush aimed to revamp the functioning of public sector banks so that PSBs can compete with the Private Sector Banks. The mission is a brainchild of PJ Nayak committee.

• It is launched by Ministry of Finance under the Department of Financial Services. The mission is regarded as one of the big steps after the nationalisation of banks in 1970s.
• The mission includes the seven key reforms of appointments, board of bureau, capitalisation, de-stressing, empowerment, framework of accountability and governance reforms.