Government of India has come out with a whopping Rs. 881 billion for recapitalization of public sector banks through bonds in 2017-18 financial years. This will pave way for 20 PSU banks in meeting their Capital Adequacy requirements.
Strict terms have been placed, for issue of these recapitalisation bonds. Few of them are:
- Creation of a stressed asset management vertical to be tied up with agencies, for specialised monitoring of loans above Rs. 2.5 billion
- Strict surveillance on big loan defaulters
- Appointment of a whole time director for monitoring reforms every quarter
What this recapitalisation expected to bring?
- It enables an additional credit off take capacity of PSU Banks by more than Rs. 5 trillion.
- Banks now, will be able to maintain regulartory capital requirements which could lead for further growth.
- Banks have an opportunity to go for reforms, and become more professional and ensure clean and prudent lending policies.
- Size of consortium to reduce to 7-8 banks from 20-22 banks with minimum 10% exposure for each bank.
Following is the chart which gives the details of capital infusion to different PSU Banks.
| (Amount in Rs. Billion) | |||
| (1) BANKS REQUIRING PCA | (2) Non-PCA Banks –Stronger PSBs | ||
| IDBI Bank | 106.1 | State Bank of India | 88.0 |
| Bank of India | 92.3 | Punjab National Bank | 54.7 |
| UCO Bank | 65.1 | UCO Bank | 53.7 |
| Central Bank of India | 51.6 | Bank of Baroda | 48.6 |
| Indian Overseas Bank | 47.0 | Canara Bank | 47.0 |
| OBC | 35.7 | Union Bank of India | 45.2 |
| Dena Bank | 30.4 | Syndicate Bank | 28.4 |
| Bank of Maharashtra | 31.7 | Andhra Bank | 18.9 |
| United Western Bank | 26.3 | Vijaya Bank | 12.7 |
| Corporation Bank | 21.8 | Punjab & Sind Bank | 7.8 |
| Allahabad Bank | 15.0 | ||
| Total | 523.0 | Total | 358.0 |
Note:
i) Maturity : 10-15 years in six slots
ii) Coupon rate is floating but will not be more than 8% Source: Finance Ministry
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