The government on Tuesday allocated Rs 22,915 crore to recapitalise 13 public sector banks (PSBs), including the biggest lender State Bank of India (SBI). This is the first tranche of capital infusion for the fiscal and more funds would be provided in future depending upon the performance of PSU banks, a Finance Ministry statement said. In March and April this year, deployment into the banking stocks was Rs 82,195.78 crore and 85,330.17 crore, respectively, Sebi data shows.
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State Bank, the nation’s largest, will get 75.8 billion rupees, while Indian Overseas will receive 31 billion rupees, the Indian Ministry of Finance said in an e-mailed statement yesterday.
Canara Bank with an allocation of Rs 997 crore, United bank of India Rs 810 crore, Union Bank of India Rs 721 crore, Corporation Bank Rs 677 crore, Dena Bank Rs 594 crore and Allahabad Bank Rs 44 crore, were among the other state-run banks that received capital support.
The infusion will boost the government’s shareholdings in the banks, and improve liquidity available with the banks.
As per these norms, Indian banks have to maintain a minimum capital adequacy of 9 percent, and an additional capital conservation buffer in the form of equity of 2.5 percent.
Also, the surging bad loans and weaker profitability had compounded their woes. But even now our focus remains on private banks as there is less asset quality issue compared to public sector banks,”said a fund manager of a top fund house”.
Rating agency Fitch said on Monday that it is not clear whether the 700 billion rupees infusion will be sufficient. As much as 80 percent of this would be need for state-run banks.
Johri said he has been buying shares of some government banks in the past six months.
In the 2016-17 Union Budget, the government provided Rs 25,000 crore for capitalisation of banks. Many public-sector banks are likely to find it hard to access new capital from non-government sources, Fitch added.
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The seriousness of the issue came to the fore after the RBI carried out an asset quality review in December and asked banks to reveal bad loans and take them on their books by the end of March 2017.
