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Govt to inject Rs 42,000 crore in debt-laden PSBs by March-end

27 Nov 2018 Evaluate

In order to improve financial health of the public sector banks (PSBs), the government will inject Rs 42,000 crore into debt-laden PSBs by March-end. Besides, the next tranche of recapitalisation would be released as early as in the month of December. The Rs 42,000 crore capital infusion is part of the Rs 2.11 lakh crore, two-year, front-loaded bank recapitalisation plan announced by the government in October 2017 to support credit growth.

The large PSBs such as State Bank of India and Punjab National Bank (PNB) may not need more capital infusion from the government in the current financial year ending March 2019. PNB has already received regulatory capital twice so far. The government earlier this year pumped Rs 11,336 crore in five PSBs including PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank.

State-owned banks will need less capital to meet their capital adequacy norms, as the Reserve Bank of India recently decided to defer the deadline for them to meet the global norms or Basel-III requirement by a year till March 2020. The RBI Board, while deciding to retain the capital adequacy requirement for banks at 9%, agreed to extend the transition period for implementing the last tranche of 0.625% under the capital conservation buffer (CCB) by one year up to March 31, 2020.

The government announced Rs 2.11 lakh crore capital infusion programme in October last year. According to the plan, the PSBs were to get Rs 1.35 lakh crore through recapitalisation bonds, and the balance Rs 58,000 crore through the raising of capital from the market. Out of the Rs 1.35 lakh crore, the government has already infused about Rs 82,000 crore through the bonds.

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