The government has announced a new bank recapitalisation plan on Wednesday to help struggling public sector banks boost their growth. Under this plan, 12 public sector banks (PSBs) will get a total funding of Rs.48,239 crore. This infusion of additional capital will help various banks with their capital requirements and enable credit growth in the economy.
Among the PSBs operating in the banking sector, Corporation Bank will get the highest amount of funding with Rs.9,086 crore. This is followed by Allahabad Bank, which will get a capital infusion of Rs.6,896 crore. India’s second largest public sector lender Punjab National Bank will get Rs.5,908 crore, Andhra Bank will get Rs.3,256 crore, and Syndicate Bank will receive Rs.1,603 crore.
The announcement about the recapitalisation plan was made by Rajeev Kumar, the Secretary of Department of Financial Services in the Ministry of Finance, in a tweet. He added that his funding will help banks remain out of Prompt Corrective Action (PCA) triggers.
Govt approves ₹ 48239 cr recap to 12 PSBs (₹ 1 lakh cr in FY) to equip 2 better-performing PSBs to be above reg PCA triggers, ensure PSBs brought out remain above PCA triggers, avoid PCA for PSBs in breach, & min reg capital for all PCA PSBs @PMOIndia @FinMinIndia @PIB_India pic.twitter.com/4dyY57ixHb
— Rajeev kumar (@rajeevkumr) February 20, 2019
This recapitalisation plan is aimed at meeting the government’s revised target of Rs.1.06 trillion to recapitalise public sector banks in this fiscal year. During the start of this fiscal year, this target was set at Rs.65,000 crore. The government has so far infused about Rs.51,533 crore in the first three quarters into various PSBs.
With this additional funding, banks can provide loans to various small businesses in the country and improve their credit growth. This will also boost the country’s economic growth. Moreover, banks that are struggling with non-performing assets and capital shortage can use this funding to come out of the PCA imposed by the Reserve Bank of India (RBI).
The ruling government has been focusing on boosting job growth in the country through various measures. This recapitalisation plan will enable PSBs to provide credit to businesses in various sectors that can create new jobs.