DNA Money Edit: Govt's fund infusion plan to buoy PSBs

The government's plan to infuse an additional capital of up to Rs 30,000 crore will give another fillip to the ailing public sector banks (PSBs) now looking to improve their financial health. But the spurt in bad loans in several banks has put an additional stress.

The earlier capital infusion plan that entailed PSBs raising Rs 58,000 from stock markets by March 2019 had run aground in the falling markets. The plan, which helps banks meet global capital norms called Basel III, was to mobilise Rs 2.11 lakh crore over the next two years -- Rs 18,100 crore through Budgetary provisions, Rs 1.35 lakh crore via recapitalisation bonds and fundraising of Rs 58,000 crore from the markets. 

The government has already pumped in Rs 11,336 crore into five PSBs earlier this year. The scam-hit Punjab National Bank got the highest amount of Rs 2,816 crore, while Allahabad Bank, Rs 1,790 crore. PNB Board later approved a capital infusion of Rs 5,431 crore.

A few banks are likely to come out of the Reserve Bank of India's prompt corrective action (PCA) watchlist soon as norms get diluted and PSBs show improvement in their performance. At present, 11 state-run lenders are under the PCA that imposes lending and other restrictions. Once out of PCA, the banks will be in a better position to raise funds.