Govt pumps in Rs 22,915 crore capital in 13 PSU banks to boost credit growth

New Delhi: The government Tuesday provided Rs 22,915 crore capital to 13 PSU banks including SBI, PNB and IOB to enhance their lending operations and enable them to raise more money from the market.

This is the first tranche of capital infusion for the fiscal and more funds would be provided in future depending upon the performance of PSU banks, a Finance Ministry statement said.

“75 percent of the amount… is being released now to provide liquidity support for lending operations as also to enable banks to raise funds from the market. The remaining amount, to be released later, (will be) linked to performance with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations,” the statement said.

Out of the Rs 22,915 crore, State Bank of India (SBI) received 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 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.

Shares of PSU banks jumped after the capital infusion plan. SBI shares rose 0.92 percent to Rs 230.70, PNB gained 1.24 percent to Rs 134.15.

Finance Minister Arun Jaitley in Budget 2016-17 had proposed to allocate Rs 25,000 crore towards recapitalisation of PSU banks. “If additional capital is required by these banks, we will find the resources for doing so. We stand solidly behind these Banks,” he had said.

Under Indradhanush roadmap announced by the government last year, government will infuse Rs 70,000 crore in state banks over four years while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel-III.

In line with the blueprint, PSU banks are to get Rs 25,000 crore each in 2015-16 and 2016-17 fiscal. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.