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Huge Boost For Public Sector Banks As Arun Jaitley Announces To Infuse Rs 83,000 Crore

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| December 21 , 2018 , 18:32 IST

Finance Minister Arun Jaitley, announced Rs. 83,000 for Public Sector Banks in the upcoming few months on Thursday.

He said that the government will enhance the capital infusion in public sector banks in the next few months taking the total to Rs 1.06 lakh crore for the current financial year ending on March 31, 2019.

Jaitely said that Rs 1.06 lakh crore for the entire fiscal year and Rs 83,000 crore, which is remaining, is going to be utilised under four different heads.

He also explained all those heads as the first is to ensure that banks meet their regulatory capital norms.

The second will be that the better-performing banks under the RBI's prompt corrective action (PCA) are given capital to achieve a 9 per cent Capital to Risk Weighted Assets Ratio (CRAR) and required capital conservation buffer and the 6 per cent net NPA requirements. This will enable them to come out of the PCA itself.

The third category will be the non-PCA banks which are very close to the PCA red-line will be provided capital so that they do not come under the framework. Some capital will also be provided to banks which are going to be merged to meet regulatory norms and growth capital, Jaitley added.

The government had earlier announced an infusion of Rs 65,000 crore in public sector banks in 2018-19, out of which Rs 23,000 crore has already been given to them while the remaining Rs 42,000 crore has still to be disbursed.

The government also sought the Parliament's approval for infusion of an additional Rs 41,000 crore into public sector banks. This amount, which will be infused through the issue of government securities (recapitalisation bonds), is over the Rs 2.11 lakh crore recapitalisation plan announced in October 2017.

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Earlier this year, the government had announced the merger of Dena Bank and Vijaya Bank with Bank of Baroda.

Rajiv Kumar, the Financial Services Secretary said that three banks were on the verge of being included in the prompt corrective action (PCA), but with this infusion, they will be safe. A total of 11 out of the 21 PSBs are under RBI's PCA framework, which imposes lending restrictions on weak banks.

The government predicted that PSBs would raise Rs 58,000 crore from the stock markets by March 2019 to meet Basel III norms. Out of this, Rs 24,400 crore has been raised by banks so far, Kumar added.