PSBs to get Rs 7,577 crore from govt

The government is infusing Rs 7,577 crore capital in six public sector banks (PSBs), as some of them were on verge of breaching minimum capital norms, as on December 31, 2017.

It is the first tranche of Rs 2.11 lakh crore investment package announced by the government for PSBs. Among the six PSBs, IDBI Bank is getting the highest infusion worth Rs 2,729 crore, followed by Bank of India (Rs 2,257), UCO Bank (1,375 crore), Bank of Maharashtra (650 crore), Central Bank of India (323 crore), Dena Bank (243 crore).

Banks are supposed to maintain minimum 9% capital adequacy ratio (CAR) plus a capital conservation buffer of 2.5%. Within the CAR, minimum common equity Tier-I (CET 1) capital ratio is prescribed at 5.5%. The Kolkata-based UCO Bank has informed stock exchanges that the Centre, in its letter dated December 28, 'communicated its sanction for release of ₹1,375 crore towards preferential allotment of equity shares.' IDBI Bank has also informed the exchanges about the capital infusion, followed by Central Bank of India, Bank of India, Dena Bank, Bank of Maharashtra.

According to data available with RBI, capital adequacy ratio of PSBs as on September 30, 2017 stood at 12.2% while the CET 1 ratio was 4.7%. Most of these banks have lower CET ratio along with bulging gross NPAs. UCO Bank had a CET 1 of 6.64% and gross non-performing asset ratio of 19.74% as on September 30.

IDBI Bank, on other hand, was in a deeper crisis on the same date. The bank had a CET 1 of 6.56% and gross non-performing asset ratio of 24.98%.

All these banks are saddled with huge non-performing assets and are under the prompt corrective action (PCA) framework of the Reserve Bank of India - which means certain operations of these banks have been curtailed by the regulator.