The government is planning to infuse Rs 48,239 crore into 12 public sector banks (PSBs) in the ongoing fiscal to help them maintain regulatory capital requirements and finance growth plans.
However, analysts say the fresh capital will be unable to fund growth as most of it will be utilised as provisions for large non-performing assets (NPAs) of the PSBs.
Rajeev Kumar, secretary, Department of Financial Services, said the capital approved will help the PSBs in retaining better capital ratios and ensuring that they remain above PCA (prompt corrective action) triggers.
PCA is a framework mandated by Reserve Bank of India (RBI) under which lending restrictions are imposed on the banks until they bring down their non-performing assets (NPAs). The threshold for PCA triggers are capital to risk-weighted assets ratio (CRAR), NPA levels and return on assets (RoA).
The government has allocated funds to better-performing banks under the PCA, banks which may breach the PCA triggers and the banks which have recently come out of the PCA.
Allahabad Bank and Corporation Bank, which are the better-performing PSBs under PCA, will get a fund infusion of Rs 6,896 crore and Rs 9,086 crore, respectively.
The PSBs that exited the PCA will be allocated Rs 4,843 crore so that they remain adequately capitalised. Under this allocation, the government will provide Rs 4,638 crore to Bank of India while Bank of Maharashtra will get Rs 205 crore.
To adequately capitalise banks which have not come under PCA, the government plans to infuse Rs 14,879 crore into four lenders. Of this Rs 14,879 crore, 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 into four other banks under PCA -- Central Bank of India, United Bank, UCO Bank and Indian Overseas Bank.
In December, the government had infused Rs 28,615 crore into seven public sector banks (PSBs) through recapitalisation bonds.
"The capital allocation takes care of weaker PSBs, ensuring some banks like Allahabad Bank and Corporation Bank exit PCA framework while others remain outside PCA or meet regulatory capital ratios. However, it is surprising that no capital has been allocated even to the merging banks like Bank of Baroda, Dena Bank and Vijaya Bank," said Anil Gupta, vice-president and sector head - financial ratings, Icra Ltd.
"Further, we expect a large portion of this capital to be utilised for provisioning for NPAs, and hence, growth capital is expected to be limited with banks," he said.
"The government of India has also not announced any capital infusion for the next financial year (FY2020) in its Interim Budget and with limited growth capital, ability of PSBs to support credit growth will remain dependent on their ability to raise fresh capital from markets or GoI announcing more capital in budget after general elections," Gupta added.
FOR BANKS UNDER PCA
- Rs 15,982 cr – Allahabad Bank and Corporation Bank are set to get
- Rs 12,535 cr – Central Bank of India, United Bank, UCO Bank and Indian Overseas Bank will get
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