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

• In a bid to boost credit growth in the economy, the Centre announced a sum of Rs.22,915 crore for recapitalisation of 13 public sector banks.
• State Bank of India (SBI) is to 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 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
• 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.

About mission Indradhanush
Finance minister Arun Jaitley launched this seven pronged plan-- Indradhanush--to revamp functioning of public sector banks. The seven elements include appointments, board of bureau, capitalisation, de-stressing, empowerment, framework of accountability and governance reforms.
Highlights
Appointments
The Government decided to separate the post of Chairman and Managing Director by prescribing that in the subsequent vacancies to be filled up the CEO will get the designation of MD & CEO and there would be another person who would be appointed as non-Executive Chairman of PSBs.
Bank Board Bureau
The Bank Board Bureau will start functioning from the next financial year and is the first step toward a full-fledged bank holding company, an entity that will house the government's stake in state run banks struggling with mounting non-performing loans that have touched 6 per cent of gross advances.
Capitalization
The government will inject a total of Rs 25,000 crore of capital into debt-laden state banks in this fiscal; Rs 20,000 crore would be injected in a month. Over the next four years, the government plans to inject Rs 70,000 crore.
De-stressing
The government will concentrate on distressing the banks’ bad loans. An institutional mechanism will be brought to manage NPAs.
Empowerment
The government will strive to make it easier for PSBs to hire. The government is looking at introducing Employee Stock Ownership Plan (ESOPs) for the PSU bank managements.
Framework of Accountability
The government also announced a new framework of key performance indicators for state-run lenders to boost efficiency in functioning while assuring them of independence in decision making on purely commercial considerations.
Governance Reforms
The process of governance reforms started with “Gyan Sangam” - a conclave of PSBs and FIs organized at the beginning of 2015 in Pune which was attended by all stake-holders including Prime Minister, Finance Minister, MoS (Finance), Governor, RBI and CMDs of all PSBs and FIs. There was focus group discussion on six different topics which resulted in specific decisions on optimizing capital, digitizing processes, strengthening risk management, improving managerial performance and financial inclusion.

By: Vishal