CAG report notices deficiencies in recapitalisation of PSBs
A compliance audit report of the CAG has observed deficiencies in the recapitalisation of public sector banks (PSBs).
The Department of Financial Services (DFS) has recapitalised PSBs for credit growth, meeting the requirement for regulatory capital, equipping better performing PSBs placed under Reserve Bank of India's prompt corrective action framework to come out of it and meet capital requirement on account of amalgamation of PSBs.
The CAG report observed that DFS infused Rs 8,800 crore into SBI in 2017-18 for credit growth considering it as the largest PSB in the country even though there was no demand. The DFS did not conduct assessment of the capital requirement as per its own standard practice before recapitalisation.
The CAG report also observed that DFS considered cushion over and above the norms prescribed by the RBI while recapitalising the PSBs. The RBI had already prescribed enhanced capital requirement of additional 1 per cent on banks in India. This resulted in excess infusion of Rs 7,785.81 crore.
Ther audit also observed that DFS infused Rs 831 crore into the Bank of Maharashtra in 2019-20 against the bank's demand of Rs 798 crore to avoid surrender of funds amounting to Rs 33 crore.
The compliance audit report No. 1 of 2023 of the Comptroller and Auditor General of India on Union government (economic and service ministries - civil) for the year ended March 2021 was presented in the Parliament on Monday.
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1 year ago
Banking Reforms Committee in 1993 itself suggested winding up of the DFS. It is unnecessary duplication of regulatory intervention at the height of inefficiency for decades. It is a drain on the exchequer. Several departments make references to the DFS on clarifications over the functioning of Banks over the access to credit and invariably they sit on the files. Several pensioners likewise wait for decision for decades as the cases are pending with Supreme Courts or High Courts as the DFS replies were either incomplete or not received although the banks considered responded positively. Now that the CAG confirmed the inefficiencies of the DFS, Hon'ble Minister for Finance may take a timely call to wind up this DFS.
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