In a bid to boost the liquidity in the banking system, the government has allocated Rs 23,000 crore to recapitalize 13 public sector banks (PSBs), including the biggest lender State Bank of India. The sum which is 92% of the budgeted provision of Rs 25,000 crore, is aimed at supporting lending operations of these banks and helping them mop up money from markets.
Out of the Rs 23,000 crore, the highest sum of Rs 7,575 crore will be released for SBI, followed by Rs 3,101 crore for Indian Overseas Bank and Rs 2,816 crore for Punjab National Bank.The yardstick for allocation was capital requirements of the banks based on compounded annual growth rate for the last five years, banks' own projections of credit growth and an objective assessment of the potential for growth of each PSU bank.
Following the above exercise, 75 per cent of Rs 23,000 crore, that is Rs 17,186.25 core, is being released now to provide liquidity support for lending operations and to enable banks to raise funds from the market. The remaining amount of Rs 5,728.75 crore to be released later is linked to performance, with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations. The allocation of Rs 23,000 crore will be made against the shares issued by PSU banks to the government.