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    Budget 2019: What Sitharaman's budget had for India's banks

    Synopsis

    There was an announcement for bank account holders too, with Sitharaman saying that customers may get control over cash deposited by other into their acounts.

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    Sitharaman announced a Rs 70,000 crore capital infusion into public sector banks in an effort to boost credit.
    In the Union Budget presented today, Finance Minister Nirmala Sitharaman announced a Rs 70,000 crore capital infusion into public sector banks in an effort to boost credit.

    She announced that there has been a record recovery of over 4 lakh crore of bad loans through IBC in the last 4 years, and that provision coverage has been the highest in the last 7 years.

    She also pointed out the smooth consolidation of public sector banks under Modi goverment, which she said should get credit for bringing a significant number of banks out of the prompt corrective action (PCA) framework.

    There was an announcement for bank account holders too, with Sitharaman saying that customers may get control over cash deposited by other into their acounts.
    In his February Budget speech, interim Finance minister Piyush Goyal had said that the government expected banks on RBI's Prompt Corrective Action (PCA) list to soon turn the corner. Goyal's budget, however, had not provided any allocation for recapitalisation of banks.

    As of late June 2019, five banks were still under the framework that imposes certain restrictions on lending. Banking giants such as PNB and Union Bank of India reported major losses in the last quarter.

    Loans worth Rs 17 lakh crore have been identified as NPAs since 2016. A humongous 80 per cent of these loans are held by public sector banks.

    Modi government recapitalised state-run lenders with Rs 1.6 lakh crore in 2018-19, the highest ever so far. The move helped five banks come out of the PCA framework.

    Officials say most Indian banks are currently well-provisioned (at around 75% or above). They also say a number of expected recoveries via IBC in the first quarter of this financial year will add to the profitability of banks.

    Earlier in June, the government had announced that it may infuse Rs 40,000 crore into public sector banks in 2019-20, which it said is expected to shore up their balance sheets, thereby enabling them to step up lending. Officials had said that the amount would be used to aid credit growth, besides helping weaker banks to maintain regulatory norms.


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