Ten public sector banks (PSBs), which are involved in a mega merger, are likely to receive capital infusion from the government in Budget 2020 to supplement their provisional requirements, Business Standard reported.
All 10 banks involved in the PSB mega-merger have fast-tracked their due diligence to meet the December 31 deadline. The findings would be used to ascertain the allocation of capital, the article quotes a source as saying.
Moneycontrol could not independently verify the report.
Merger related costs would reflect in Q3 and Q4 FY20, and banks thus expect another round of capital infusion after consolidation, the report stated.
The banks – Punjab National Bank (PNB), Union Bank of India, Canara Bank and Indian Bank, are the anchor banks for six smaller nationalised banks. PNB and Union Bank hired Deloitte, Canara Bank hired PricewaterhouseCoopers, and Indian Bank appointed KPMG to conduct the exercise, which was announced in September.
“We are expected to furnish the findings by January next year and also state the additional provision anchor banks and the merging banks would require,” the article quotes a banker in a major PSB as stating.
The difficulties in assessment have arisen as many PSBs are working on loan accounts with inter-creditors agreements, and where resolution is expected in at least 50 percent cases, a banker said.
For example, Canara Bank, PNB and Union Bank will receive Rs 8,857 crore from the Essar Steel resolution. The recapitalisation this time is thus not expected to exceed Rs 50,000 crore.
Since FY18, state-run banks have received Rs 2.66 lakh crore capital to deal with non-performing assets and maintain the Reserve Bank mandated thresholds.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
