Lok Sabha Question No. 2041 (UNSTARRED), answered on 2015-07-31
Subject: Capital Adequacy Norms
Ministry: FINANCE
Asked by: R. GOPALAKRISHNAN, P. C. MOHAN, K. MARAGATHAM, T. RADHAKRISHNAN, AJAY (TENI) MISRA, PR. SENTHILNATHAN

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF FINANCIAL SERVICES

LOK SABHA

UNSTARRED QUESTION NO. 2041

TO BE ANSWERED ON THE 31 st JULY, 2015 / SHRAVANA 9, 1937 (SAKA)

QUESTION

CAPITAL ADEQUACY NORMS

2041. SHRI R. GOPALAKRISHNAN                                                      SHRI T. RADHAKRISHNAN

SHRI P.C. MOHAN                                                                       SHRI AJAY MISRA TENI

SHRIMATI K. MARAGATHAM                                                     SHRI PR. SENTHIL NATHAN

Will the Minister of FINANCE be pleased to state:

(a)   whether the Government has given any direction to the Reserve Bank of India (RBI) regarding provisioning norms of Public Sector Banks (PSBs) against their Non Performing Assets (NPAs) enhancing the quantum provision from the existing norms;

(b)   if so, the details thereof along with the percentage of provision made from the current year and implications of affecting profitability to their capital vis-a-vis their capital;

(c)  whether the Government has any proposal to release/ infuse money to the PSBs to maintain capital adequacy norms as per Basel Committee recommendations and if so, the details thereof along with the amount provided to various banks;

(d) whether the Government have encouraged the banks to take commercial decisions and mobilise capital from the market to meet their capital needs; and

(e) if so, the details thereof along with the steps taken/being taken by the Government in this regard?

ANSWER

THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

(SHRI JAYANT SINHA)

1. & (b): Considering the need for banks to make higher specific provisions as part of the prudential provisioning framework, Reserve Bank of India enhanced provisioning norms of  Non Performing Assets (NPAs) as per their Circular DBOD. No. BP.BC. /21.04.048/2011-12 dated May 18, 2011. Details of rates of provisioning for Non-Performing Assets applicable before and after the date of the circular are at Annexure.

(c): The Government is making an assessment of capital needs of Public Sector Banks (PSBs).

(d) & (e): Yes, Madam. Government has issued order dated 10.12.2014 allowing PSBs to raise capital from markets through Follow-on Public Offer (FPO) or Qualified Institutional Placement (QIP) by diluting Government of India holding upto 52% in phased manner based on their stock performance, liquidity,  market appetite etc.

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Annexure

| Rates of Provisioning for Non-Performing Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
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| Category of Advances Category of Advances Rate of Provision before May 18, 2011 (%) Revised Rate after May 18, 2011(%) Sub-standard Advances Sub-standard Advances Sub-standard Advances Sub-standard Advances * Secured Exposures 10 15 * Unsecured Exposures 20 25 * Unsecured Exposures in respect of Infrastructure loan accounts where certain safeguards such as escrow accounts are available. 15 20 Doubtful Advances - Unsecured Portion Doubtful Advances - Unsecured Portion 100 100 Doubtful Advances - Secured Portion Doubtful Advances - Secured Portion Doubtful Advances - Secured Portion Doubtful Advances - Secured Portion * For Doubtful upto 1 year 20 25 * For Doubtful > 1 year and upto 3 years 30 40 * For Doubtful > 3 years 100 100 Loss Advances Loss Advances 100 100 |

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