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 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.
One basis point is one-hundredth of a percentage point.
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RBI had last fiscal withdrawn all loan restructuring schemes and introduced tough rules to report loans not repaid for more than 90 days and to take defaulters to bankruptcy courts for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.