The Government of India today unveiled details of the re-capitalisation of Public Sector Banks (PSBs) announced in October, 2017.  The capital infusion plan for 2017-18 includes ₹ 80,000 crore through Recap Bonds and ₹ 8,139 crore as budgetary support.  This plan addresses regulatory capital requirement of all PSBs and provides a significant amount towards growth capital for increasing lending to the economy.

The recap would be accompanied by a strong reforms package across six themes incorporating 30 action points. The reforms agenda is based on the recommendations made at the PSB Manthan held in November, 2017 involving senior management of PSBs and representatives from Government.  The reform agenda is aimed at EASE - Enhanced Access and Service Excellence, focusing on six themes of customer responsiveness, responsible banking, credit off take, PSBs as Udyami Mitra, deepening financial inclusion & digitalisation and developing personnel for brand PSB.   The overarching framework for the reforms agenda is “Responsive and Responsible PSBs”.

Capital infusion by the Government is contingent on performance of PSBs on the reform.  Whole Time Directors of PSBs would be assigned theme wise reforms for implementation.  Their performance in this regard would be evaluated by the bank Board.

A survey by an independent agency in respect of EASE would be conducted to measure public perception about improvements in access and service quality.  Results of the survey shall be made public each year.

Taken together, the recap & reform agenda is sharply focused on strengthening PSBs, increasing lending to MSMEs and making it easier for MSMEs and retail customers to transact as well as significantly increasing access to banking services.  It includes a commitment to banking services within 5 kms of every village, refund  within 10 days of any unauthorised debit in electronic  transactions, a mobile App  for locating banking outlets and a mobile ATM in every underserved district.

Bank recapitalisation conditional on reform links capital release to PSB implementation of performance-focused EASE measures. The Government pairs bank recapitalisation with a performance-linked reform programme: capital support to meet regulatory and growth needs is contingent on PSBs implementing a six-theme, thirty-point EASE reform agenda evaluated by bank boards and measured by independent public perception surveys, targeting improved customer responsiveness, financial inclusion, MSME credit expansion, digitalisation, and operational access enhancements.