PSU banks seek higher capital infusion from government

New Delhi: Facing temporary disruption in business due to demonetisation, state-owned banks have sought higher capital support from the government.

RBI too has endorsed their view of higher capital infusion, sources said.

In a pre-budget meeting of heads of banks and financial institutions with Finance Minister Arun Jaitley today, the issue of higher capital infusion came up for discussion, they said.

Under the Indradhanush roadmap announced last year, the government will infuse Rs 25,000 crore in PSU banks during the current fiscal.

The government in July had announced the first round of capital infusion of Rs 22,915 crore for 13 PSU banks. Of this, 75 per cent has already been released to these banks.

Banks have not been able to carry lending activity since November 8 as their prime focus has been on exchanging notes and accepting old currency.

Besides, some banks also sought removal of service tax for digital transactions to make it more attractive and doing away with service tax on deposit guarantee.

Yes Bank, in its written recommendation submitted to the Finance Minister has said taht there is a need to encourage bank deposits by reducing lock-in period for tax rebates to 1 year from existing 5 years and enhance the threshold for mandatory Tax Deduction at Source on interest income to Rs 50,000 a year from Rs 10,000 at present.

To promote digital transactions, the private lender suggested debit cards with smart chips for public transport payments and developing mechanism for change to make payments at retail outlets through e-wallets instead of cash.

Finance Industry Development Council (FIDC) said eligibility norms for NBFCs to avail refinance from MUDRA need to be made favourable to provide them funding, more so as an alternative to public deposits, in tune with the RBI's policy.