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Shares of leading state-run banks fall after recapitalisation plan


Giving presentation on banking reforms, Secretary Department of Financial Services, Rajeev Kumar said, repositioning PSBs will lead the growth and serve people responsibly and responsively.

"We have announced Rs 2.11 lakh crore recapitalisation of PSBs in October 2017". In the current round, IDBI Bank got the biggest capital injection at Rs 10,610 crore.

Finance Minister Arun Jaitley said the government wants to build an "institutional mechanism" to ensure that problems that his government inherited do not recur.

He also stated about the "new age PSBs".

The generous capital given to stressed banks will help them wriggle out of the regulator's stifling prompt corrective action and brighten prospects of raising fresh funds with better ratings to clean their books, officials and analysts said.

Investors holding banking stocks that the recapitalisation move, (capital infusion of Rs 80,000 crore through recap bonds and RS 8139 crore was through budgetary support as explained by FM Jaitley) would bring down NPAs were left disappointed.


"As far as we are concerned, we are adequately capitalised at this point in time and don't really need the capital", said P.K. Gupta, Managing Director of State Bank of India.

Also, the additional capital buffers will enhance the banks' ability to raise equity capital. "As discussed earlier this recapitalisation will be front loaded depending on the performance and merit of the PSB", said Kumar.

Indian Bank, a smaller but profitable state-run lender, was the only bank to have not been allocated any capital in the latest round. "The original decision stands, it has not been reconsidered but then there is always a time in implementing the decision", Jaitley had told mediapersons while unveiling banking sector reforms on January 24. These bonds will be non-tradable and not carry the status of an SLR (Statutory Liquidity Ratio) security, Economic Affairs Secretary Subhash Chandra Garg said.

IDBI Bank, which will receive 106.1 billion rupees in aid, has a nonperforming loan ratio of 16.1% as of September. But the programme goes beyond infusion of money as the ministry informed that the recapitalisation will be "accompanied" with reforms at public sector banks.

Among banks now under the PCA, UCO Bank will get Rs 6,507 crore, Central Bank of India Rs 5,158 crore, Indian Overseas Bank Rs 4,694 crore, Oriental Bank of Commerce Rs 3,571 crore, Dena Bank Rs 3,045 crore, Bank of Maharashtra Rs 3,173 crore, United Bank of India Rs 2,634 crore, Corporation Bank Rs 2,187 crore and Allahabad Bank Rs 1,500 crore.

Among the PSU lenders, while the Punjab National Bank shares cracked 7.07 per cent to Rs 180.80, Syndicate Bank ended lower by 6.92 per cent to Rs 76.70 and Bank of Baroda settled with a drop of 6.09 per cent to Rs 167.20.

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