The  ₹48,239 crore fund infusion in 12 PSU banks is over and above the  ₹65,000 crore earmarked for them at the begining on 2018-19. (Bloomberg)
The 48,239 crore fund infusion in 12 PSU banks is over and above the 65,000 crore earmarked for them at the begining on 2018-19. (Bloomberg)

12 PSU banks to get 48,000 crore more in FY19 as part of bank recapitalisation plan

  • The fresh bank recapitalisation plan is aimed at meeting the 1.06 trillion revised target to recapitalise banks this fiscal
  • The bank recapitalisation of weak banks is expected to boost credit growth and help PSU banks meet capital requirements

New Delhi/Mumbai: The government on Wednesday said it would inject 48,239 crore in 2018-19 into 12 public sector banks, including Allahabad Bank and Corporation Bank, to help them meet capital requirements and accelerate lending to boost growth.

Corporation Bank will get the highest capital infusion at 9,086 crore, followed by Allahabad Bank, which will get 6,896 crore. Among the other lenders, Punjab National Bank will get 5,908 crore, Union Bank of India 4,112 crore, Andhra Bank 3,256 crore and Syndicate Bank 1,603 crore.

The fresh bank recapitalisation plan is aimed at meeting the 1.06 trillion revised target to recapitalise banks this fiscal, a steep rise from the 65,000 crore allocated for state-run lenders at the beginning of the fiscal.

The recapitalisation of weak banks is expected to boost credit growth, especially to small businesses, as well as help PSU banks meet capital requirements. It is also aimed at helping them come out of Reserve Bank of India's (RBI) prompt corrective action (PCA) framework. In the first three quarters of this fiscal, the government infused 51,533 crore into state-run banks.

The Narendra Modi government has been taking steps to improve access to credit to job-creating sectors of the economy and to stimulate economic growth. Earlier this month, RBI had cut interest rates by 25 basis points, the first such cut in 18 months.

One basis point is one-hundredth of a percentage point.

The bank recapitalisation aims to help state-run banks meet regulatory requirements and boost credit growth.
The bank recapitalisation aims to help state-run banks meet regulatory requirements and boost credit growth.

On Wednesday, P.V. Bharathi, managing director and chief executive of Corporation Bank, said the bank’s health was improving. “Currently, we are out of all the conditions of PCA and it is only the non-performing asset (NPA) percentage that has to come down," said Bharathi, adding that recoveries had improved.

Two other banks that received capital infusion commitments on Wednesday had lending restrictions on them lifted last month. One of them, Bank of India, will get 4,638 crore, while Bank of Maharashtra will get 205 crore. The government will also pump 12,535 crore into four other banks under the PCA framework: Central Bank of India, UCO Bank, United Bank of India and Indian Overseas Bank.

The latest move is part of the 2.1 trillion bank recapitalisation plan announced in October 2017 to improve the health of the banking sector struggling with a pile of toxic assets. Official data shows that scheduled commercial banks had 10 trillion of gross NPAs at the end of December 2018.

RBI had last fiscal withdrawn all loan restructuring schemes and introduced tough rules to report loans not repaid for more than 90 days and to take defaulters to bankruptcy courts for resolution.

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