Capital Infusion Current Affairs
Union Finance Ministry is planning to infuse additional capital close to Rs 11,336 crore in 5 more public sector banks (PSBs) by September 2018-end. These five state-owned banks are Punjab National Bank (PNB), Corporation Bank, Andhra Bank, Allahabad Bank and Indian Overseas Bank (IOB).
This round of capital infusion will be done through issuance of recapitalisation bonds and not directly from Budget. This additional capital will help these banks to meet minimum regulatory capital adequacy ratio (CAR) and enable them to make interest payments on certain bonds on time.
Within capital infusion plan of these five PSBs, PNB is expected to get highest amount of Rs 2,816 crore. Corporation Bank is will get Rs 2,555 crore followed by Indian Overseas Bank (Rs 2157 crore), Andhra Bank (Rs 2,019 crore) and Allahabad Bank (Rs 1,790 crore).
This capital infusion by Government will be only for purpose of meeting minimum regulatory requirement and will be not growth capital which will be provided in second half of current fiscal year. The growth capital will only be given to those banks which meet performance targets and modalities set by Finance Ministry as per agreement signed with each bank.
The latest round capital infusion in these 5 PSBs will be part of remaining Rs 65,000 crore out of Rs 2.11 lakh crore capital infusion announced by Union Government for two financial years. In October 2017, Union Government had announced Rs 2.11 lakh crore capital infusion programme, under which PSBs were to get Rs 1.35 lakh crore through recapitalisation bonds, and balance Rs 58,000 crore through raising of capital from market and remaining through budgetary support. The government has already infused Rs 80,000 crore out of Rs 1.35 lakh crore through recapitalisation bonds in PSBs and balance will be done during this financial year (2018-19).
The Cabinet Committee on Economic Affairs (CCEA) has approved the capital infusion of Rs. 2000 crore for strengthening of Export Credit Guarantee Corporation (ECGC) to enhance insurance coverage to micro, small medium enterprises (MSMEs) exports. The amount will be infused in three financial years i.e. Rs.50 crore in 2017-18, Rs.1450 crore in 2018-19 and Rs.500 crore in 2019-20.
The infusion of capital will enhance insurance coverage to MSME exports and strengthen India’s exports to emerging and challenging markets like Africa, CIS (Commonwealth of Independent States) and Latin American countries. With enhanced capital, ECGC’s underwriting capacity and risk to capital ratio will improve considerably.
With stronger underwriting capacity, ECGC will be in better position to support Indian exporters to tap new and unexplored markets. Increased capital infusion will also help ECGC to diversify its product portfolio and provide cost effective credit insurance which will help exporters to gain stronger foothold in difficult markets. Covers from ECGC will help in improving competitive position of India exporters in International markets. More than 85% of customers benefitted by ECGC’s covers are MSMEs. ECGC covers exports to around 200 countries in the world.
ECGC is a premier export credit agency of Union Government to provide Export Credit Insurance Services to facilitate exports from the country. It offers credit insurance schemes to exporters to protect them against losses due to non-payment of export dues by overseas buyers due to political or commercial risks.