Non-performing assets (NPAs) of public sector banks (PSBs) dropped by Rs 23,860 crore in the first half of the current fiscal from a peak of Rs 9.62 lakh crore in March 2018, in a sign that the worst is behind, according to financial services secretary Rajiv Kumar.
The finance ministry believes the improvement in the performance will be further bolstered by a series of infusions worth Rs 83,000 crore planned over the next few months, as even stressed banks will be given capital to meet their regulatory requirement.
While the government has already infused around Rs 23,000 crore into various PSBs, it has decided to infuse another Rs 28,615 crore into seven public sector banks (PSBs) — of which six are already under the prompt corrective action (PCA) regime of the central bank — through recapitalisation bonds by end-December.
Bank of India will get the highest amount of Rs 10,086 crore, followed by Oriental Bank of Commerce (Rs 5,500 crore), Bank of Maharashtra (Rs 4,498 crore), UCO Bank (Rs 3,056 crore) and United Bank of India (Rs 2,159 crore).
The government would infuse Rs 41,000 crore more into PSBs in the current fiscal, over and above the budgeted Rs 65,000 crore, finance minister Arun Jaitley said last week. The move could enable 4-5 banks — including Bank of India and United Bank — to come out of the PCA framework in coming months.
Kumar had said last week that non-NPA accounts overdue by 31 to 90 days (special mention accounts 1 and 2) of PSBs fell 61% over five successive quarters, from Rs 2.25 lakh crore as of June 2017 to Rs 0.87 lakh crore by September 2018, substantially paring down credit at risk. Their provision coverage ratio also jumped from 46.04% in March 2015 to 66.85% as of September 2018. Also, a record recovery of Rs 60,726 crore was effected by PSBs in H1FY19, more than double the amount a year before.