A Comptroller and Auditor General of India (CAG) report, presented in the Parliament on Monday, stated that the Department of Financial Services (DFS) gave Rs 8,800 crore to State Bank of India without the lender asking for such funds. The CAG report stated that the funds, given in FY18, was part of a recapitalisation exercise.
The government recapitalises public sector banks (PSBs) for credit growth, meeting the requirement for regulatory capital, equipping better performing lenders placed under Reserve Bank of India's Prompt Corrective Action framework to come out of it and meeting capital requirement on account of amalgamation.
According to the report, the department under the finance ministry did not conduct an assessment of the capital requirement, which is its own standard practice before recapitalisation. “DFS infused Rs 8,800 crore into SBI in 2017-18 for credit growth considering it the largest PSB in the country even though there was no demand. DFS did not conduct assessment of the capital requirement as per its own standard practice before recapitalisation,'' stated the report.
DFS also considered a cushion over and above the norms prescribed by the Reserve Bank of India while recapitalising PSBs. The CAG report stated that RBI had already prescribed enhanced capital requirement of additional 1 per cent on Indian banks, resulting in an excess infusion of Rs 7,785.81 crore.
It also said that the department infused Rs 831 crore into Bank of Maharashtra in 2019-20 against the bank’s demand of Rs 798 crore to avoid surrender of funds worth Rs 33 crore.
(With PTI inputs)
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