Govt announces Rs 48,239 cr recapitalisation plan for 12 public sector banks
The finance ministry on Wednesday announced to pump in Rs 48,239 crore in 12 public sector banks in this fiscal to help them maintain regulatory capital requirements and finance growth plans
The government will infuse Rs 9,086 crore in Corporation Bank and Rs 6,896 crore in Allahabad Bank
Punjab National Bank will get Rs 5,908 crore and Union Bank of India Rs 4,112 crore
The government will pump in Rs 12,535 crore in four other banks under PCA
New Delhi: The Finance Ministry on Wednesday announced to pump in Rs 48,239 crore in 12 public sector banks (PSBs) in this fiscal to help them maintain regulatory capital requirements and finance growth plans.
With this funding, the total amount of capital infusion would increase to Rs 1,00,958 crore of the planned recapitalisation of Rs 1.06 lakh crore for PSBs for the current fiscal, according to Financial Services Secretary Rajiv Kumar.
The remaining Rs 5,000 crore capital infusion would be used as a buffer for any contingency or growth capital for Bank of Baroda which is in the process of merging Dena Bank and Vijaya Bank with itself.
"It (pending Rs 5000 crore) may be used for any contingency or for growth capital wherever it is necessary including amalgamated entity of Bank of Baroda," Kumar said.
Corporation Bank is the biggest beneficiary of this round of capital infusion with Rs 9,086 crore of funding, followed by Allahabad Bank with Rs 6,896 crore.
Explaining the rationale for giving higher capital to these two banks, Kumar said equipping these two better performing banks, currently under the Prompt Corrective Action (PCA) supervision of the RBI, would help meet requisite capital thresholds of 7.375 CET-1 ratio, 8.875 percent Tier I ratio, 10.875 percent of capital-to-risk weighted assets ratio (CRAR) and the net NPA ratio threshold of below 6 percent.
Govt approves ₹ 48239 cr recap to 12 PSBs (₹ 1 lakh cr in FY) to equip 2 better-performing PSBs to be above reg PCA triggers, ensure PSBs brought out remain above PCA triggers, avoid PCA for PSBs in breach, & min reg capital for all PCA PSBs @PMOIndia @FinMinIndia @PIB_India pic.twitter.com/4dyY57ixHb
— Rajeev kumar (@rajeevkumr) February 20, 2019
Further, Rs 4,638 crore and Rs 205 crore will be provided to Bank of India and Bank of Maharashtra. These banks have recently come out of the regulatory supervisory framework PCA of the RBI.
Kumar further said Punjab National Bank will get Rs 5,908 crore, Union Bank of India Rs 4,112 crore, Andhra Bank Rs 3,256 crore and Syndicate Bank Rs 1,603 crore.
The government will pump in Rs 12,535 crore in four other banks under PCA -- Central Bank of India, United Bank, UCO Bank and Indian Overseas Bank.
The government in December had increased the outlay by Rs 41,000 crore for infusion in public sector banks. As a result, the total recapitalisation in the current fiscal from Rs 65,000 crore to Rs 1.06 lakh crore.
Subsequently, the government infused Rs 28,615 crore into seven public sector banks (PSBs) through recapitalisation bonds.
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The amount will be borrowed by the Centre under the Special Window in appropriate tranches and will be passed on to states in back-to back loans, said a finance ministry statement. However, it did not say who will service the interest and principal payments