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Govt to infuse Rs 42,000 crore in PSU banks within March

Govt to infuse Rs 42,000 crore in PSU banks within March

New Delhi: The government will infuse Rs 42,000 crore in the state-owned banks by March-end and the next tranche would be released as early as next month, a senior finance ministry official said Monday. The government earlier this year pumped Rs 11,336 crore in five PSBs -- PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank — to improve their financial health.

"We will infuse the next tranche of recapitalisation by mid-December. Close to Rs 42,000 crore remain to be infused as capital in public sector banks in the current financial year," the official said. He said that large PSBs such as State Bank of India and Punjab National Bank (PNB) may not need more capital infusion in the current financial year ending March 2019.

"Some big state-owned banks like SBI and PNB may not need further capital infusion from the government in 2018-19. PNB has already received regulatory capital twice so far," the official said. State-owned banks will need less capital to meet their capital adequacy norms, as the Reserve Bank of India last week decided to defer the deadline for them to meet the global norms or Basel-III requirement by a year till March 2020.

The RBI Board last week, while deciding to retain the capital adequacy requirement for banks at 9 per cent, agreed to extend the transition period for implementing the last tranche of 0.625 per cent under the capital conservation buffer (CCB) by one year up to March 31, 2020.

Rating agency Moody's Investors Service had last week said the decision of the RBI board to extend the timeline for banks to implement Basel III guidelines is 'credit negative' for PSBs.

The government announced the Rs 2.11-lakh crore capital infusion programme in October last year. According to the plan, the PSBs were to get Rs 1.35 lakh crore through recapitalisation bonds, and the balance Rs 58,000 crore through the raising of capital from the market.

Out of the Rs 1.35 lakh crore, the government has already infused about Rs 82,000 crore through the bonds.

Last week the the Finance Ministry assured that it would not curtail its capital infusion plan for this financial year even as state-owned banks would be needing fewer funds following the RBI's decision to defer the deadline to meet Basel III norms by a year, according to sources. Under the new dispensation, the capital infusion by the government in public sector banks for meeting the capital buffer norms would come down to around Rs 15,000-20,000 crore, sources said.

However, there will not be any reduction in the capital funding plan as announced in October last year despite a lower requirement due to the extension of the deadline for meeting the CCB of 2.5 per cent until March 2020, sources said.

The capital infusion would help improve the financial health of banks, sources said, adding that some banks would get necessary regulatory capital while others would get it for fueling growth, they clarified. Earlier this week, the RBI in the central board meeting decided to extend the implementation of the last tranche of 0.625 per cent of capital conservation buffer by a year to March 2020.

However, the board decided to retain the capital adequacy ratio or CRAR at 9 per cent, against 8 per cent prescribed by Basel III norms. The CCB currently stands at 1.875 per cent and the remaining 0.625 per cent was to be met by March 2019, as per the earlier deadline fixed by the RBI.

The extension of the timeline for the implementation of the last tranche of the CCB under Basel-III capital regulations could reduce the burden of public sector banks (PSBs) by Rs 35,000 crore this fiscal, according to rating agency Crisil.

Generally, there is a leverage of 10 times on the capital, sources said adding that the lending capacity would increase by Rs 3.5 lakh crore. After assessing the requirement of each bank, the ministry is expected to finalise the capital infusion of about Rs 54,000 crore by this month-end or by the first half of the next month.

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