New Delhi: In a bid to shore up cash- strapped public sector banks, the government has injected Rs 22,915 crore capital in 13 lenders including SBI and Indian Overseas Bank to revive loan growth that has hit a two-decade low.
This is the first tranche of capital infusion for the current fiscal and more funds would be provided in future depending on the performance of PSBs, a Finance Ministry statement said.
In all Rs 70,000 crore in capital is to be invested over four years to contain risks in the banking industry. Out of the Rs 22,915 crore, State Bank of India (SBI) will get Rs 7,575 crore, followed by Indian Overseas Bank (Rs 3,101 crore) and Punjab National Bank (Rs 2,816 crore). The other lenders, which have received capital infusion are Bank of India (Rs 1,784 crore), Central Bank of India (Rs 1,729 crore), Syndicate Bank (Rs 1,034 crore), UCO Bank (Rs 1,033 crore), Canara Bank (Rs 997 crore), United Bank of India (Rs 810 crore), Union Bank of India (Rs 721 crore), Corporation Bank (Rs 677 crore), Dena Bank (Rs 594 crore) and Allahabad Bank (Rs 44 crore). The infusion will boost the government’s shareholdings in the banks, which have been under-capitalised compared with their private peers because of restrictions on their ability to sell equity to raise money. The average Capital Adequacy Ratio (CAR) — or the ratio of a bank’s capital to its risk — for public sector banks stood at 11.6 per cent as of March 31, lower than 13.2 per cent for banking system as a whole. Basel-III regulations provide for bank to have a minimum capital ratio of 9 per cent by March 31, 2019. Also, the surging bad loans and weaker profitability had compounded their woes. NPAs of public sector banks stood at 14.5 per cent of their outstanding credit as of March as opposed to 4.5 per cent of private banks. Rating agency Fitch says the banks need USD 90 billion in new capital to meet Basel III requirements. As much as 80 per cent of this would be need for state-run banks. The capital infusion exercise for the current fiscal is based on an assessment of need as assessed from the compounded annual growth rate (CAGR) of credit growth for the last five years, banks’ own projections of credit growth and an objective assessment of the potential for growth of each PSBs, the ministry said. — PTI.
