Finance Ministry may review the capital requirements of public sector banks after the second quarter

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After the second quarter of the current financial year ie September, the Finance Ministry will review the capital requirements of public sector banks. By then the moratorium period will be over and the increased data on bad loans on banks will be clear.

Finance ministry sources say economic activity has slowed due to the Corona epidemic and lockdown, which could lead to a large increase in non-performing assets. If this happens, banks will have to increase the NPA provisions as per RBI directives.

The Moratorium period will end in August, after which the NPA position will be more clear. Therefore it would be appropriate to make an actual assessment of the capital requirements of banks only after the data for the second quarter. Uday Kotak, president of banking sector business and industry organization CII, said that to support the economy, public sector banks would need financial help.

If the bad loan increases, banks will need additional capital of Rs 3-4 lakh crore. Rating agencies estimate that NPAs may grow by 4.5 per cent in 2020-21.

Debt restructuring relief
Sources say that if the RBI accepts the debt restructuring appeal for the areas affected by the Corona epidemic, the banks will get relief. This will allow additional time for recovery of the loan amount instead of declaring NPA.

This would include options such as amending the EMI amount in addition to a change in interest rate or duration. The government has given 3.15 lakh crore capital to the banks in the last 11 years. In 2019-20 too, capital of 70 thousand crores was infused in public banks.

abstract

  • Ministry of Finance will review the situation
  • Bad loan figures may increase after moratorium period
  • Banks are expected to increase 4.5% NPA in 2020-21

Detailed

After the second quarter of the current financial year ie September, the Finance Ministry will review the capital requirements of public sector banks. By then the moratorium period will be over and the increased data on bad loans on banks will be clear.

Finance ministry sources say economic activity has slowed due to the Corona epidemic and lockdown, which could lead to a large increase in non-performing assets. If this happens, banks will have to increase the NPA provisions as per RBI directives.

The term of the Moratorium will expire in August, after which the NPA position will be more clear. Therefore it would be appropriate to make an actual assessment of the capital requirements of banks only after the data for the second quarter. Uday Kotak, president of banking sector business and industry organization CII, said that to support the economy, public sector banks would need financial help.

If the bad loan increases, banks will need additional capital of Rs 3-4 lakh crore. Rating agencies estimate that NPAs may grow by 4.5 per cent in 2020-21.

Debt restructuring relief
Sources say that if the RBI accepts the debt restructuring appeal for the areas affected by the Corona epidemic, the banks will get relief. This will allow additional time for recovery of the loan amount instead of declaring NPA.

This would include options such as amending the EMI amount in addition to a change in interest rate or duration. The government has given 3.15 lakh crore capital to banks in the last 11 years. In 2019-20 too, capital of 70 thousand crores was infused in public banks.

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