Ministry not to seek funds for PSB recapitalisation

New Delhi (IANS) After enhancing the recapitalisation amount for public sector banks (PSBs) to Rs 1.06 lakh crore in the last fiscal, the Finance Ministry is not in favour of infusing more funds in PSBs so soon after, and is unlikely to seek provision for it in the forthcoming Union Budget, an official source said on Tuesday.

"We have not sought any capital in the Budget so far for banks recapitalisation. The reviews of their funding needs are usually done in Q3 (third quarter) onwards, so we don't know the assessment as of now," the source said. 

And also they have just been funded in last fiscal and if further should they need funds, we will raise it through supplementary demands", he added.

In 2018-19, the government had pumped in the highest-ever infusion of Rs 1.6 lakh crore into PSBs to meet regulatory and growth capital requirements, helping five lenders come out of the Reserve Bank of India's (RBI) Prompt Corrective Action (PCA) framework for banks with massive accumulated non-performing assets (NPAs or bad loans). 

The interim budget presented in February did not provide any allocation for recapitalisation.

As per the latest data from the RBI, credit growth increased 11.7 per cent year-on-year in April, higher than 10.5 per cent in the same period a year ago.

In February this year, the government approved a Rs 48,239 crore recapitalisation plan for 12 PSBs, including the fraud-hit Punjab National Bank (PNB), to help them come out of the PCA framework.

The government infused Rs 6,896 crore in Allahabad Bank, Rs 4,112 crore in Union Bank, Rs 205 crore in Bank of Maharashtra, Rs 4,638 crore in Bank of India, Rs 9,086 crore in Corporation Bank and Rs 3,806 crore in Indian Overseas Bank.

It also put in Rs 3,256 crore in Andhra Bank, Rs 1,603 crore in Syndicate Bank, Rs 5,908 crore in PNB, Rs 2,560 crore in Central Bank of India, Rs 2,839 crore in United Bank and Rs 3,330 crore in UCO Bank.

In December, the government increased the bank recapitalisation outlay for 2018-19 to Rs 1.06 lakh crore.

This was done to help two better-performing PSBs stay above the regulatory PCA trigger threshold, as well as to ensure that PSBs brought out of the framework succeed in remaining above the PCA threshold.