Six stressed PSBs may receive Rs 10,000 crore in capital infusion

The government is likely to immediately infuse about Rs 10,000 crore in six state-run lenders, including United Bank of India, Dena Bank and Bank of Maharashtra, over the next few weeks, a finance ministry official said.

These six lenders are under stress and immediate infusion is to help them maintain the required regulatory capital, the official said. This amount will come from the Indradhanush Plan, where around Rs 18,000 crore is still left, the person told ET.

Announced in 2015, Indradhanush is a seven-pronged revamp plan for public sector banks (PSBs) that includes a capital infusion to the tune of Rs 70,000 crore by FY 2019.


In October, the government had announced a Rs 2.1 lakh crore capital infusion plan for state-owned banks, of which Rs 1.35 lakh crore was to be raised through bonds.

“The mega recap plan will kick later in this fiscal,” the finance ministry official said. “We are working out whether it should be based on last quarter results.”

At present, around 11 PSBs are under the Reserve Bank of India’s prompt corrective action framework, which forces certain mandatory restrictions or corrective actions on ailing banks.

The list includes Bank of India, Indian Overseas Bank, Dena Bank, Corporation Bank, Central Bank of India, IDBI Bank, UCO Bank, United Bank of India, Bank of Maharashtra and Oriental Bank of Commerce.

In August, the RBI had identified 28 accounts that banks were asked to resolve by December 13, failing which these would have to be taken for insolvency proceedings.

A senior bank executive said that banks will have to make provisions for losses, given most accounts identified by the central bank for resolution are set to go through the bankruptcy process.

“There may be resolution for maybe one or two accounts,” the executive said. “Though most banks have made provisions but this will still impact their profitability,” he added.

Non-performing assets (NPAs) of PSBs have increased to Rs 7.34 lakh crore as of September 2017 from Rs 2.78 lakh crore in March 2015. According to a research report by ratings agency CARE, India's NPA ratio is one of the highest in the group of 'high-NPA' nations. The only countries with a higher NPA than India are Portugal, Italy, Ireland and Greece.

Last week, financial services secretary Rajiv Kumar had in a tweet assured that government is committed to strengthen PSBs. “Do not believe rumour mongers. Recap, reforms roadmap for public sector banks firmly on track,” he had tweeted.