Govt to infuse Rs 2.11 lakh crore into public sector banks

The government on Tuesday unveiled an unprecedented Rs 2,11,000 crore package for recapitalisation of the PSU banks in a major push to boost growth and create jobs in the economy.

The Union Cabinet cleared the package on Tuesday afternoon.

Bank stocks rose in afternoon trade on Tuesday in Mumbai trade after reports that the government was set to announce fund infusion into ailing PSU banks with immediate effect.

The government said Rs 76,000 crore for the package will come as budgetary support while the rest will come from market borrowing through bank recapitalisation bonds. These bonds will be frontloaded.

Domestic banks need around Rs 25,000 crore for provisioning for fresh bad loans and another Rs 1 lakh crore growth capital.

The banking sector is grappling with asset worries. Latest available data suggest some 39 listed banks had amassed Rs 8.35 lakh crore worth of non-performing assets.

Earlier, PSU banking stocks surged on hopes of funds infusion from the government. The Nifty PSU Bank index closed 3.79 per cent up at 2,984.15. Andhra Bank, Syndicate Bank, Punjab National Bank and Oriental Bank gained between 4 per cent and 8 per cent.