The Department of Financial Services (DFS) had given ₹8,800 crore to State Bank of India as part of recapitalisation exercise without the country’s biggest lender asking for such funds in FY18, a CAG report presented in Parliament on Monday said.
The department under the finance ministry did not conduct assessment of the capital requirement as per its own standard practice before recapitalisation, as per 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.
“DFS infused ₹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,” it said.
The report further said DFS considered cushion over and above the norms prescribed by the Reserve Bank of India (RBI) while recapitalising PSBs.
“RBI had already prescribed enhanced capital requirement of additional 1 per cent on banks in India. This resulted in excess infusion of ₹7,785.81 crore,” it said.
DFS infused ₹831 crore into Bank of Maharashtra in 2019-20 against the bank’s demand of ₹798 crore to avoid surrender of funds amounting to ₹33 crore, it added.
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.