Rs 4,638 crore and Rs 205 crore will be provided to Bank of India and Bank of Maharashtra.
Mumbai: The government on Wednesday announced recapitalisation of Rs 48,239 crore in 12 public sector banks in this fiscal to help them manage balance sheet stress and deal with the Reserve Bank’ prompt corrective action (PCA) framework.
Financial Services Secretary Rajiv Kumar said the government will infuse Rs 9,086 crore in Corporation Bank and Rs 6,896 crore in Allahabad Bank--the two "better-performing" banks currently under the PCA supervision of the Reserve Bank of India (RBI).
Further, Rs 4,638 crore and Rs 205 crore will be provided to Bank of India and Bank of Maharashtra. These two banks have recently come out the RBI’s PCA restrictions and the capital infusion will help them to remain above the PCA triggers.
Kumar said Punjab National Bank will get Rs 5,908 crore, Union Bank of India Rs 4,112 crore, Andhra Bank Rs 3,256 crore and Syndicate Bank Rs 1,603 crore.
The government will pump in Rs 12,535 crore in four other banks under PCA—Central Bank of India, United Bank of India, UCO Bank and Indian Overseas Bank.
The government in December had infused Rs 28,615 crore into seven public sector banks (PSBs) through recapitalisation bonds.
After this tranche of capital infusion, Rs 5,000 crore will remain to be infused in PSBs for the current financial year. “It (the pending Rs 5,000 crore) may be used for any contingency or for growth capital wherever it’s necessary, including amalgamated entity of Bank of Baroda,” Kumar said.
In a tweet, Kumar said, "govt approves Rs 48239 cr recap to 12 PSBs (Rs 1 lakh in FY) to equip 2 better performing PSBs to be above reg PCA triggers, ensure PSBs brought out remain above PCA triggers, avoid PCA for PSBs in breach, and minimum regulatory capital for all PCA PSBs."
According to experts, the capital allocation takes care of weakerPSBs, ensuring that some like Allahabad Bank and Corporation Bank exit the PCA framework while others remain outside the PCA or meet regulatory capital ratios.
Anil Gupta, Vice-President, Sector Head- Financial Ratings, ICRA, said, “We expect a large portion of this capital to be utilised for provisioning for NPAs and hence growth capital is expected to be limited with banks. The government has also not announced any capital infusion for FY2020 in its interim budget and with limited growth capital, the ability of PSBs to support credit growth will remain dependent on their ability to raise fresh capital from markets or government announcing more capital in budget after general elections.”