New Delhi: Centre on Tuesday allocated Rs 22,915 crore for the capitalisation of 13 Public Sector Banks to check risks in the banking industry and also to sustain loan growth. Finance ministry said that 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.
The infusion will boost the government’s shareholdings in the state lenders. State lenders have been under-capitalised compared with their private peers because of restrictions on their ability to sell equity to raise money.
Government shareholdings are required to be a minimum of 51 percent so they can’t sell their equity to market indefinitely. The average capital-adequacy ratio for government-owned lenders stood at 11.6 percent as of March 31, lower than 13.2 percent for the banking system as a whole. In all Rs 70,000 crore in capital is to be invested over four years to contain risks in the banking industry.
“Government has undertaken an exercise to assess the capitalisation needs of Public Sector Banks during the year 2016-17. The capital infusion exercise for the current year is based on an assessment of need as assessed from the 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 Public Sector Bank,” said finance ministry. It said that consequent upon the exercise, 75 per cent of the amount collected for each bank 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 is linked to performance, with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations,” said the ministry. SBI will get Rs 7,575 crore, followed by Indian Overseas Bank and Punjab National Bank. The list also includes Bank of India, Central Bank of India, Syndicate Bank, UCO Bank, Canara Bank, Corporation Bank.
