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Govt gives PSBs Rs 22,915 cr to help raise more money from market

 MPost |  2016-07-20 23:06:29.0  |  New Delhi

Govt gives PSBs Rs 22,915 cr to help raise more money from market

In a move aimed at providing liquidity support to public sector undertaking (PSU) banks, the Centre has infused Rs 22,915 crore to 13 PSU banks, including State Bank of India (SBI), Punjab National Bank (PNB) and Indian Overseas Bank (IOB), to enhance their lending operations. According to government communiqué, the step has been taken to enable these banks to raise more money from the market. 

This is first part of capital infusion for this fiscal year and more funds would be provided in future depending upon the performance of PSU banks, the Finance Ministry has stated in its official press note. “The 75 per cent of the amount, which has been released now, is to provide liquidity support for lending operations to all the 13 PSU banks which were struggling with liquidity issues. 

The released fund will help all 13 banks to raise funds from the market,” the statement said, adding that the remaining amount, to be released later and would be linked to performance with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations. Out of the Rs 22,915 crore, the SBI has received maximum of Rs 7,575 crore followed by IOB which got Rs 3,101 crore and PNB with Rs 2,816 crore into its account. The Allahabad Bank has got least financial support of just Rs 44 crore.

The other lenders, which have received capital infusion are Bank of India (Rs 1,784 crore), Central Bank of India (Rs 1,729 crore), Syndicate Bank (Rs 1,034 crore), UCO Bank (Rs 1,033 crore), Canara Bank (Rs 997 crore), United Bank of India (Rs 810 crore), Union Bank of India (Rs 721 crore), Corporation Bank (Rs 677 crore) and Dena Bank (Rs 594 crore). 

The capital infusion exercise for the current fiscal is based on an assessment of need as assessed from the compounded annual growth rate (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 PSBs, the Ministry said. Shares of PSU banks jumped after the capital infusion plan. The SBI shares rose 0.92 per cent to Rs 230.70, PNB gained 1.24 per cent to Rs 134.15. 

Finance Minister Arun Jaitley in Budget 2016-17 had proposed to allocate Rs 25,000 crore towards recapitalisation of PSU banks. “If additional capital is required by these banks, we will find the resources for doing so. We stand solidly behind these Banks,” he had said while presenting his second budget. 

Under Indradhanush roadmap announced by the government last year, government will infuse Rs 70,000 crore in state banks over four years while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel-III. In line with the blueprint, PSU banks are to get Rs 25,000 crore each in 2015-16 and 2016-17 fiscal. Besides, Rs 10,000 crore each would be provided to banks in 2017-18 and 2018-19. 

Capital infusion to help clean up balance sheets: SBI Chair Arundhati
New Delhi: Government’s decision to release Rs 22,915 crore as first tranche of capital infusion in state- owned banks in the current fiscal will help them clean up the balance sheets and increase lending, SBI chairman Arundhati Bhattacharya said on Tuesday. “The provision of bank capital is most welcome and is very timely. We are hopeful that such provision of capital will help the banks in increasing lending, raising additional funding and cleaning up their balance sheets,” she said in a statement. 

In a bid to shore up cash-strapped public sector banks, the government today injected Rs 22,915 crore capital in 13 lenders including SBI, Indian Overseas Bank and Punjab National Bank and promised to release more funds depending upon their performance. Out of the total, State Bank of India will get Rs 7,575 crore, followed by Indian Overseas Bank (Rs 3,101 crore) and Punjab National Bank (Rs 2,816 crore). 

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