Bank re-capitalization: Govt allocates Rs 22,915 cr for PSU

In line with its Budget announcement, the government today announced it would infuse Rs 22,915 crore into 13 public sector (PSU) banks to help them cope with their non-performing loans and shore up their capitals levels. Seventy five percent of the fund infusion will be made immediately, the government said in a press release, while the remaining amount will be linked to performance. "The capital infusion exercise for the current year is based on an assessment of need as assessed from the CAGR of credit growth for the last five years, banks’ own projections of credit growth and an objective assessment of the potential for growth of each public sector bank," the government said. The amounts to be infused differ for banks depending on their sizes and needs:





SBI   (Rs 7,575 crore), 
IOB   (Rs 3,101 crore), 
PNB   (Rs 2,816 crore), 
BoB (Rs 1,784 crore), 
Central Bank   (Rs 1,729 crore), 
Syndicate Bank   (Rs 1,034 crore), 
UCO Bank   (1,033 crore), 
Canara Bank   (Rs 997 crore), 
United Bank   (Rs 810 crore), 
Union Bank   (Rs 721 crore), 
Corporation Bank   (Rs 677 crore),
Dena Bank   (Rs 594 crore) and 
Allahabad Bank   (Rs 44 crore). 
The infusion is part of the plan chalked out by the government under its Indradhanush initiative to infuse Rs 70,000 crore in banks till FY19. "Any injection of equity is a positive given the stress," said banking analyst Hemindra Hazari, "but Rs 70,000 crore is not enough, it should've allocated at least Rs 1 lakh crore." "The asset quality issue, in my opinion, has not yet peaked out. There will be more pain ahead," he added. He advised retail investors should stay away from PSU bank stocks. "This space is only for institutional investors because they are part of indexes and they have to own it." 

Source: CNBC-TV18