12 state-run lenders to get ₹48,000 cr capital infusion

NEW DELHI/MUMBAI: The government on Wednesday said it will inject ₹48,239 crore this fiscal into 12 state-run lenders, including Allahabad Bank and Corporation Bank, to help them meet capital requirements and accelerate lending to boost growth.

Corporation Bank will get the highest capital infusion at ₹9,086 crore, followed by Allahabad Bank which will get ₹6,896 crore. Among the other lenders, Punjab National Bank will get ₹5,908 crore, Union Bank of India ₹4,112 crore, Andhra Bank ₹3,256 crore and Syndicate Bank ₹1,603 crore.

The fresh capital infusion is aimed at meeting the ₹1.06 lakh crore revised target to recapitalize banks this fiscal, a steep increase from the ₹65,000 crore allocated for state-run lenders at the beginning of the fiscal year.

The recapitalization of weak banks is expected to boost credit growth, especially to small businesses, as well as help banks meet capital requirements. It is also aimed at helping them come out of lending restrictions that Reserve Bank of India has imposed on weak banks. In the first three quarters of this fiscal, the government pumped in ₹51,533 crore into state-run banks.

The Narendra Modi government has been taking steps to improve access to credit to jobcreating sectors of the economy and to stimulate economic growth. Earlier this month, RBI had cut interest rates by 25 basis points, the first such cut in 18 months. PV Bharathi, managing director and chief executive of Corporation Bank, said in Mumbai on Wednesday that the bank’s health was improving. “Currently we are out of all the conditions of PCA (prompt corrective action) and it is only the non-performing asset percentage that has to come down,” said Bharathi, adding that recoveries have improved.

Two other banks that received capital infusion commitments on Wednesday had lending restrictions on them lifted last month.

One of them, Bank of India will get ₹4,638 crore, while Bank of Maharashtra will get ₹205 crore. The government will also pump in ₹12,535 crore into four other banks under the PCA framework—central Bank of India, UCO Bank, United Bank of India and Indian Overseas Bank.

The latest move is part of the ₹2.1 lakh crore capital infusion plan announced in October 2017 to improve the health of the banking sector struggling with a pile of toxic assets. According to official data, scheduled commercial banks have ₹10 lakh crore of gross non-performing assets at the end of December 2018.

The RBI had last fiscal withdrawn all loan restructuring schemes and introduced tough rules to report loans not repaid for more than 90 days and to take defaulters to bankruptcy courts for resolution.