Govt initiates mega PSU Banks' recapitalisation plan

Jan 26, 2018, 02:15
Govt initiates mega PSU Banks' recapitalisation plan

In financial year 2017-18, the recapitalisation amount for PCA banks would be Rs. 52, 311 crore, of which the largest beneficiaries include IDBI (Rs. 10,610 crore), Bank of India (Rs. 9,232 crore), UCO Bank (Rs. 6,507 crore), and Central Bank of India (Rs. 5,158 crore).

When the original plan of injecting Rs 2.11 lakh crore capital was announced last October, officials, including Chief Economic Adviser Arvind Subramanian, had indicated that the government will follow a "selective and differential approach" wherein priority would to be given to strong lenders while weak banks may have to either shrink in size or not grow from the current position.

There was no relief for IDBI Bank, the biggest gainer of the cash infusion as its shares fell around a per cent.

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The ministry is working on the various steps to be taken to ensure that the governance of the banks follows highest standards, said Finance Minister Arun Jaitley.

He also stated about the "new age PSBs". The funds will help PSBs meet the regulatory capital ratios under Basel III regulations.

Going forward, each bank will adopt a board approved policy as per its core strength and monetise their non-core activity, he said, adding that many banks have identified various non-core assets and started monetising them.

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While 11 "weak banks", under the Reserve Bank of India's (RBI) "prompt corrective action" (PCA), there are nine PSU banks that are not classified under extreme distress, but nevertheless have been given funds to ramp up their capital, and thereby lending capacities. "Small banks could do well in the near term, given the quantum of capital; however, returning to normalised return on equity will probably take a long time", the report warns. The bonds will not have Statutory Liquidity Ratio (SLR) and a tenure of 10 to 15 years.

Mumbai: Stakes of State Bank of India (SBI) and other big state-run banks fell on Thursday as they stood to receive less money than investors had expected from the government's much-awaited recapitalisation plan, Reuters reported today morning.

"There is no fiscal impact of bond issuance to banks", Mr. Garg said. But the programme goes beyond infusion of money as the ministry informed that the recapitalisation will be "accompanied" with reforms at public sector banks.

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Oriental Bank of Commerce would get Rs 3,571 crore, Dena Bank Rs 3,045 crore, Bank of Maharashtra Rs 3,173 crore, United Bank of India Rs 2,634 crore, Corporation Ban Rs 2,187 crore, Syndicate Bank Rs 2,839 crore, Andhra Bank Rs 1,890 crore, Allahabad Bank Rs 1,500 crore, Punjab and Sind Bank Rs 785 crore. India Ratings and Research, the Indian outfit of Fitch Ratings group, estimates that scheduled commercial banks may need up to Rs 89,000 crore towards incremental provisioning for advances while transiting to the Ind-AS 109 regime.