The Report contains the results of the Performance Audit on Recapitalisation of Public Sector Banks (PSBs) over the period 2008-09 to 2016-17, wherein GOI, as the majority shareholder, had infused capital of ` 1,18,724 crore in the PSBs.
Audit noticed that the rationale for distribution of GOI capital among different PSBs was not found on record in some cases and the Department of Financial Services had signed (February / March 2012) MoUs with PSBs for performance linked capital infusion, however, MoUs were not adhered to. There is a significant gap between book value and market value of PSB shares, with most PSBs having a lower market value which may come in the way of PSBs approaching the market for additional capital funds. Even as a target had been set (August 2015) for PSBs to raise ` 1,10,000 crore from the markets by 2018-19, ` 7,726 crore only has been raised during January 2015 and March 2017.
Audit analysed recapitalisation of PSBs by segregating them into two categories, I and II. Audit noticed that the average ROA, ROE and rate of growth of advances has, in general, been lower in case of category II PSBs compared to category I PSBs. It was also noticed that the average capital adequacy ratio of category II PSBs was
consistently lower than that of category I PSBs.
Audit noticed that Gross NPAs of PSBs surged from ` 2.27 lakh crore (31 March 2014) to ` 6.83 lakh crore (provisional) at the end of March 2017 and there were material differences (beyond 15 per cent) between NPAs recognized by 12 PSBs and RBI leading to lower recognition of provisions and hence over-projection of net profits. The average provision coverage ratio of PSBs has generally been on the decline over 2011-12 to 2016-17.