The Reserve Bank of India has requested the Indian finance ministry to increase capital support to public sector banks beyond the amount allocated in the Union budget.
RBI deputy governor SS Mundra said: "Some capital is required for cleaning of books and supporting future growth, budgeted capital for PSU banks is not enough.
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"Budgeted amount which is over INR7,000 crore ($1.1bn) 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."
According to RBI, the banks will have to be recapitalised to meet the new Basel norms and also to help them clean up their balance sheets from bad loans.
A cleaner balance sheet will support growth returns while additional capital will support the growth, observed Mundra.
He added: "We have done some broad calculation for entire part of Basel-III committee implementation. What we are trying to indicate is that at this point of time because of certain stress on the book some capital would be consumed for cleaning of the books."
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By GlobalData"An account becoming NPA is not a sin. The time has come that it would be a better strategy that if there is a weakness in the account, rather than postponing, hiding the problem either on the part of banks or borrowers, it is important that the bank recognises NPA then extend a helping hand (to borrowers)."
