The centre will pump in whopping Rs 83,000 crore in public sector banks this financial year ending March 31, taking their total capital infusion in 2018-19 to Rs 1.06 lakh crore.
The move is expected to strengthen the balance sheet of some of the state-owned lenders and bring four-five of them out of Reserve Bank of India's prompt corrective action (PCA) framework.
Eleven out of 21 PSBs are under PCA framework, which debars them from lending to businesses among other restrictions.
"Providing capital to better performing PCA banks to achieve 9 per cent capital to risk-weighted asset ratio; 1.875% Capital Conservation Buffer and the 6% net NPA threshold, facilitating them to come out of PCA," Finance Minister Arun Jaitley told reporters announcing the government decision which is expected to ease liquidity and credit help better lending to MSMEs.
Earlier in the day, the Finance Minister had sought parliament's nod for Rs 41,000 crore additional capital to state-owned lenders which would come through recapitalisation bonds of the banks.
So far, during this year, the centre has provided only a little over Rs 11,000 crore towards PSBs recapitalisation.
The announcement of the bulk of capital release comes a day after the newly appointed RBI Governor Shaktikanta Das concluded his meeting with the chiefs of PSU banks in which they demanded a swift recapitalisation.
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