Indian Public Sector Unit (PSU) banks will need more for their recapitalization than the INR7940cr ($1240m) that has been earmarked for them, said the Reserve Bank of India (RBI).
The country’s central bank has also asked the finance ministry to increase its assistance to the banks to bolster growth in wake of increasing bad loans.
The sharp rise in bad loans has resulted in many of the financial institutions facing losses after a long time.
The Hindu quoted RBI deputy governor S S Mundra as saying: "We have been suggesting to the Finance Ministry from time to time that the public sector banks need more capital than what budget has indicated. So, we have been raising this issue at various discussions and forums and it was also formally written by the Reserve Bank of India.
"Budgeted amount which is over INR7,000cr will not be adequate from the both perspective for enabling the bank for clean up of the books which is required and growth when it comes back, to support it."
Last year, the government had to inject around INR6,990cr ($1092m) in nine public sector banks based on their performance.
Meanwhile, finance minister Arun Jaitley will carry out a performance review of state-run banks and financial institutions to discuss issues including increasing bad loans and the need to pass on the benefit of RBI’s interest rate cut to encourage growth, reported the Times of India.
Image: The Reserbe Bank of India has asked the government to increase its assistance to the PSU banks. Photo: courtesy of Nichalp.