Costly bailout: Rs 1.7 lakh cr infused into public sector banks; Rs 3.3 lakh cr notional loss in market cap

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Updated: December 21, 2018 7:09:55 AM

Compared to a situation where PSBs retained their share in bank m-cap, it would mean a notional loss of Rs 3.28 lakh crore.

Costly PSB bailout: Rs 1.7 lakh cr infused; Rs 3.3 lakh cr notional loss in M-cap

The share of public sector banks (PSBs) in total bank market capitalisation has plunged to just 25.59% now from 42.93% on May 23, 2014, just before PM Narendra Modi came to power. Compared to a situation where PSBs retained their share in bank m-cap, it would mean a notional loss of Rs 3.28 lakh crore. And this is despite the government having pumped in close to Rs 1.7 lakh crore since FY15 and planning to infuse another Rs 83,000 crore in the rest of the fiscal.

While the gross NPAs of all PSBs stood at a massive 15.6% as of March 2018, this could worsen to 16.3% by March 2019 in the baseline scenario and could touch even 17.3% under the worst stress scenario, the RBI had cautioned in its financial stability report in June.

For its part, the government says a total infusion of Rs 1.06 lakh crore in FY19 (including the additional `41,000 crore announced on Thursday) will enable 4-5 weak banks to come out of the central bank’s prompt corrective action (PCA) framework and help at least three more, including Punjab National Bank, to avoid getting into the PCA.

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