GOVT TO INFUSE FUNDS ON PSU BANKS

Government has now come out with a drastic capital infusion of Rs. 2.11 lakh crore in the PSU Banks, which is suffering from a huge NPA issues since two years period.   Further, the notification adds that

  1. 1.35 lakh crore will be through recapitalization bonds
  2. 76,000 crore from the budgetary support.
  3. This infusion process will be done over the next two fiscal years which would be associated with series of banking reforms to be announced shortly.
  4. Also, more details about the nature of bonds will be published in course of time.
  5. PSU Banks are likely to get Rs. 18,000 crore under Indradhanush plan, which inturn would be infused over a period of four years. This is expected to help the banks in meeting their capital requirements, required as per BASEL III norms.  Out of this proposed amount PSU banks were already provided Rs. 25,000 crore in 2015-16 and also a like amount has been earmarked for the coming years.  This is apart from 10,000 crore each to be infused in the years 2017-18 and 2018-19.

CONCERNS:

The NPA of Banks risen from Rs. 2.75 lakh crore in March 2015 to Rs. 7.33 lakh crore in June 2017 which is alarming.

GENERAL

  • It is a fact that without capital infusion, PSU banks mergers will not help in improving the capitalization.
  • It is further estimated that the 11 Moody’s-rated public sector banks will require external equity capital of 70,000-95,000 crore, or about $10.6-14.6 billion which is much higher than the balance of Rs. 20,000 crore which is the amount budgeted by the Government for infusion of capital till March 2019.  This analysis has assumed that stock of weakened loans would go high during this specified period, however would be at a slower pace as compared to the previous two years,.

All said and done, the PSU banks shares were boosted with the news of infusion of money by the Government.

Bank Recap Boost

Author: Admin Bankedge

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