‘ Larger PSBs to get more recap share’

New Delhi, Jan. 10: The Centre’s plan to recapitalise state- owned banks is likely to focus on supporting lending growth, with large lenders being the main beneficiaries, Fitch said on Wednesday.

The Lok Sabha last week gave its approval for ` 80,000 crore recapitalisation bonds for strengthening public sector banks ( PSBs). This would be the first tranche of the ` 1.35 lakh crore recap bonds that the Centre would issue over two years.

“Government officials have indicated that capital injections are to be targeted at supporting lending growth, which suggests the healthiest state banks - generally the larger ones - will be the main recipients,” Fitch said.

The government is frontloading the capital injections it plans to provide through recapitalisation bonds over the next two years, with the first tranche of ` 80,000 crore ($ 12 billion) accounting for 60 per cent of the total.

Fitch said banks are pushing for recapitalisation bonds to have statutory liquidity ratio ( SLR) status, which would boost their tradability and enhance liquidity, but inferences so far suggest that the bonds are likely to have non- SLR status and will be non- tradable.

“The government appears set to prioritise lending growth when allocating capital. This is likely to mean that banks currently in the RBI’s prompt corrective action ( PCA) framework will receive no more than the capital necessary to ensure they do not breach minimum regulatory capital requirements,” it said.

In an unrelated development, SBI expects the bidding process for resolution of 12 large NPAs to be over by the end of this month, the chairman said. “Financial bids of Electrosteel and Monnet Ispat have already come. We hope to receive bids for remaining cases during this month itself,” said Rajnish Kumar.

■ FITCH SAID banks are pushing for recapitalisation bonds to have SLR status, which would boost their tradability and enhance liquidity