New Delhi: The finance ministry is working out the final tranche of recapitalisation of banks amounting to Rs 45,000 crore, which will be infused in both PCA (prompt corrective action) and non-PCA banks for both their growth and regulatory capital requirements.
On a stand-alone basis, the capital infusion is also meant to help lenders who have been a part of mergers in recent times, shore up their capital bases amid liquidity crunch and credit squeeze arising out of to the NBFC crisis.
A senior government official said this is the remaining capital infusion amount out of the Rs 2.11 lakh crore announced in October 2017 by the finance ministry and the list of individual shares of the lenders is being drawn up based on their performance in the Q2 results.
The capital will help them make interest payments on additional tier 1 (AT-1) bonds they had issued. It will thus help them support growth as the lending ability of non-banking financial companies (NBFCs) has been severely impaired by the liquidity crunch post the IL&FS debacle.
Banks, which have been part of recent mergers — IDBI Bank (with LIC) and Vijaya Bank, Dena Bank and Bank of Baroda — will also receive capital from the government on an individual basis as their mergers are yet to completed.
Almost all 21 PSBs, particularly the 11 banks currently under the Reserve Bank’s prompt corrective action (PCA) framework have sought capital from the government to boost lending and meet regulatory requirements.
The government had in July approved capital infusion of Rs 11,336 crore in five public sector banks, including scam-hit Punjab National Bank, Corporation Bank and Andhra Bank, to help them meet their regulatory capital requirements.
Punjab National Bank received the maximum amount at Rs 2,816 crore followed by Corporation Bank, which will see an infusion of about Rs 2,555 crore. The others are Indian Overseas Bank (Rs 2,157 crore), Andhra Bank (Rs 2,019 crore) and Allahabad Bank (Rs 1,790 crore).
Meanwhile, Moody’s Investors Service on Tuesday said RBI board's decision to extend the timeline for banks to implement Basel 3 guidelines is “credit negative” for public sector lenders.
Also, the decision to restructure stressed micro, small and medium enterprises (MSME) loans of up to Rs 25 crore also has the potential for having negative implications for the credit profiles of Indian banks, the US-based rating agency said in a statement.
Amid growing tension between the government and the central bank, the RBI board met Monday and discussed issues to boost funding to MSMEs and ease capital pressure on banks. At the nine-hour long marathon meeting, the board advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 25 crore, subject to such conditions as are necessary for ensuring financial stability.
“While more details are awaited, this approach has the potential for negative implications for the credit profiles of Indian banks,” Moody's Investors Service vice-president (Financial Institutions Group) Srikanth Vadlamani said in a statement.
