But since April 2017, the combined market capitalization of the 11 PCA banks has increased by only ₹28,600 crore. Of course, quite a few of these banks are now out of the PCA framework, thanks to the capital infusion, but the above chart refers to all 11 banks.
For some companies, burning capital may be a sign of rapid growth, but for others, it is a sign of ill health. It is obvious that much of the funds have gone towards provisioning. Meanwhile, depressed income growth continues to keep these banks from making reasonable profits.
To be sure, being under the RBI PCA framework has a direct hit on income considering that there are a number of restrictions on banks. But even though five of the 11 banks that were placed under PCA have exited, investors don’t seem as enthused about future prospects.
Analysts say that it would take at least a couple of more years for these banks to start returning value to their promoter for the capital they have got.
It should be noted that these banks have a healthier income growth than their PCA peers, but the overhang of stressed assets continues to wipe out a large part of their earnings. But in their case the capital infusion, compared with those under PCA, is far less.
As pointed out earlier, while the government had earlier said PSU bank recapitalisation would benefit banks with better financial prospects, it looks like it has ended up doing just the opposite.
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