Centre to decide on bank recapitalisation after Q1 results: Report
For the current financial year, the government had allocated Rs 20,000 crore for capital infusion into the PSBs.
April 22, 2021 / 02:26 PM IST
For the current financial year, the government had allocated Rs 20,000 crore for capital infusion into the PSBs
The Centre is planning to strengthen weaker banks to support its privatisation bid. The government has allocated Rs 20,000 crore towards bank recapitalisation in FY22.
"While most lenders are adequately capitalised, we may take a call after first quarter results to see if some growth capital can be provided to further strengthen the banks," an official told Economic Times.
Before selecting the two banks for privatisation, the Centre is likely to increase the banks' capital to make it more attractive for the bidders. "Some additional support cannot be ruled out if it significantly increases the valuations," another official told the publication.
The government is also keen on ensuring that all banks are out of the Reserve Bank of India's Prompt Corrective Action (PCA) framework by the end of 2021, the report said.
Moneycontrol could not independently verify the report.
Indian Overseas Bank, Central Bank of India and UCO Bank are currently under this framework which puts several restrictions on them, including on lending, management compensation and directors' fees.
Under PCA, the RBI closely monitors weak banks which slip below certain financial parameters such as capital ratios, asset quality and profitability.
For the current financial year, the government had allocated Rs 20,000 crore for capital infusion into the PSBs for meeting the regulatory requirement. Among the 12 PSBs, Punjab and Sind Bank was given Rs 5,500 crore. With Rs 5,500 crore going to Punjab and Sind Bank, the government is left with Rs 14,500 crore.