The Modi government has approved the infusion of £4.82 billion in 12 public sector banks in the current financial year to ensure that the lenders are able to maintain regulatory capital requirements, step up lending and boost overall growth. Secretary of a Department of Financial Services, Rajeev Kumar stated with this latest infusion of capital, the government has now provided £10.09 billion out of the £10.6 billion bank recapitalisation plan. Corporation Bank emerged as the biggest beneficiary of the latest round of capital infusion with £908.6 million, followed by Allahabad Bank, £689.8 million.
Kumar said the recapitalisation plan aimed to strengthen better performing banks (including Allahabad Bank and Corporation Bank) under PCA (prompt corrective action) so that they can come out of this restriction. The RBI had unveiled the PCA framework in the aftermath of soaring bad loans and that was meant to serve as a watch list for weak banks on which lending restrictions were imposed. Last month, the RBI lifted curbs on three out of 11 public sector banks. Eight other PSBs - Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Central Bank of India, Indian Overseas and Dena Bank, are still under PCA, which also imposes curbs on expansion activities, among a number of other restrictions to help them get back to fiscal health.
He also said the plan is also to ensure that state-run lenders, which have emerged out of the PCA, remain above the triggers and help others such as Indian Overseas Bank, Central Bank, United Bank and UCO Bank meet minimum regulatory capital requirements. He added that the remaining £500 million may be used as a buffer for any contingency or growth capital for Bank of Baroda, which will be merged with Dena Bank and Vijaya Bank.
