PSBs to get L48,239 cr infusion from govt

 The government on Wednesday approved a recapitalisation package of around Rs 48,239 crore for 12 public sector banks in an effort to nurse weaker banks to health and help them stay fit.

Published: 21st February 2019 03:19 AM  |   Last Updated: 21st February 2019 11:09 AM   |  A+A-

By Express News Service

MUMBAI: The government on Wednesday approved a recapitalisation package of around Rs 48,239 crore for 12 public sector banks in an effort to nurse weaker banks to health and help them stay fit. The government has been working on getting the weaker banks, which are under the Reserve Bank of India’s (RBI) Prompt Corrective Action (PCA) for lack of adequate capital, or are stuck with bad loans, out of PCA so that they have more room to lend. 

Financial services secretary Rajeev Kumar tweeted that the bank recapitalisation would “equip better-performing PSBs to be above PCA triggers, ensure PSBs brought remain above PCA triggers, avoid PCA for PSBs in breach, and minimum regulatory capital for all PCA PSBs”.

Among the banks that would receive fresh capital, Allahabad Bank and Corporation Bank, categorized as better-performing banks currently under PCA, are to be helped to stay above the regulatory PCA thresholds - The regulatory requirements at present are 7.375 per CET-1 (Common Equity Tier), 8.875 per cent Tier-1, 10.875 per cent CRAR (capital risk weighted asset ratio), and NNPA (net NPA) of 6 per cent or lower. 

Bank of India and Bank of Maharashtra, which recently came out of PCA after meeting the regulatory norms and had a net NPA of less than 6 per cent as per the third quarter results, will get enough capital to stay above the PCA trigger. The non-PCA banks, Punjab National Bank, Syndicate Bank, and Andhra Bank, get enough capital to stay above the regulatory capital norms. 

“The PSU bank recapitalization is a positive development for the state-owned banks and will help them manage balance sheet stress in the near term. While the move is certainly welcome, it is largely in line with the announced plan of the government,” said Lalitabh Shrivastawa,  AVP, Research, Sharekhan by BNP Paribas.

Banks that are still under PCA—Central Bank, United Bank of India, UCO Bank and Indian Overseas Bank—would get Rs 12,535 crore. 

The government has been keen to get as many banks out of PCA as possible, concerned about lower loan growth, especially loans to the MSME segment. 

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