The Centre announced a Rs 2.1 lakh crore capital infusion plan for state-owned banks in October this year.
The planned Rs 2.1 lakh crore fund infusion for state-run banks “will be reform and a recap package and not just a recap package,” RBI Governor Urjit Patel said on Wednesday.
Notably, the Centre announced a Rs 2.1 lakh crore capital infusion plan for state-owned banks in October this year. Of this, NPA-hit banks would get Rs 1.35 lakh crore from bonds, Rs 18,000 crore from the Budget and raise the remaining Rs 58,000 crore through share sales over the next two years.
"This will be reform and a recap package and not just a recap package, so as to ensure that this money is used to strengthen public sector banks' balance sheets and that we don't sow the seeds of the next boom and bust cycle of lending," PTI quoted Patel as saying.
The Governor also clarified that the central bank is working closely with the financial services department to finalise the extent of funding for each bank and the amount of recap bonds to be on banks' balance sheets as government's equity contribution, the report said.
"In particular, recpatialsiation bonds will be front-loaded for banks that have managed their balance sheets more prudently and can use injected capital to lend, besides providing for legacy asset losses," he added.