Recapitalising banks: Government infused Rs 51,533 crore into public sector banks by December, 2018

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Updated: January 5, 2019 6:39:31 AM

The crucial move was expected to enable 4-5 banks, including Bank of India and United Bank, to come out of the PCA framework in the coming months.

The crucial move was expected to enable 4-5 banks, including Bank of India and United Bank, to come out of the PCA framework in the coming months.

The government on Friday told Parliament it had infused a total of Rs 51,533 crore into a clutch of public sector banks (PSBs) as of end-December, slightly less than a half of the Rs 1.06-lakh-crore capital proposed to be provided to PSBs in FY19.

The finance ministry believes the worst is over for state-run banks and the recent improvement in their performance will be further bolstered by a series of infusions planned over the next few months. While the more stressed banks currently under the Reserve Bank of India’s corrective regime will be given capital to just meet regulatory requirement, the relatively stronger ones will get growth capital as well.

Non-performing assets (NPAs) of PSBs dropped as much as Rs 23,860 crore in the first half of the current fiscal from a peak of `9.62 lakh crore in March 2018, in a sign that the worst is behind, financial services secretary Rajiv Kumar had said recently.
Recently, the government infused Rs 28,615 crore into seven PSBs, of which six are already under the RBI’s prompt corrective action (PCA) regime through recapitalisation bonds. Bank of India got the highest amount of Rs 10,086 crore, followed by Oriental Bank of Commerce (`5,500), Bank of Maharashtra (Rs 4,498 crore), UCO Bank (Rs 3,056 crore) and United Bank of India (`2,159 crore). Earlier this fiscal, PSBs, including fraud-hit Punjab National Bank, had got Rs 22,918 crore. Last fiscal, the government had infused Rs 88,139 crore into state-run banks.

The government would infuse `41,000 crore more into PSBs in the current fiscal, over and above the budgeted `65,000 crore, finance minister Arun Jaitley said last week. The crucial move was expected to enable 4-5 banks, including Bank of India and United Bank, to come out of the PCA framework in the coming months.

Kumar had recently said 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 `2.25 lakh crore as of June 2017 to `0.87 lakh crore by September 2018, substantially paring down credit at risk. Their provision coverage ratio has also jumped from 46.04% in March 2015 to 66.85% as of September 2018. Also, a record recovery of `60,726 crore has been effected by PSBs in H1FY19, more than double the level a year before.

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