Govt may consider advancing recapitalisation programme of public sector banks

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26 Aug, 2025 12:21

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The Finance Ministry on September 26 said it would “examine” the capital demands raised by public sector banks including Punjab National Bank and Central Bank.

“Government is examining demands raised by PSBs for the advancement of recapitalisation of banks,” said Rajeev Kumar, Secretary, Department of Financial Services (DFS) adding that PSBs have asked the government to “advance the recapitalisation programme”.

The statement assumes importance as two PSBs – PNB and Central Bank of India – have informed the stock exchange (BSE) of their respective proposals to the government to infuse more capital.

PNB will put forward request for capital infusion of Rs 5,431 crore at its board meeting on September 27, 2018, and Central Bank of India will request for Rs 2,354 crore at its board meeting on September 28, 2018.

PNB wishes to raise capital via a preferential issue of equity share while Central Bank of India wants to raise capital by issuing equity shares to the government on preferential basis.

Kumar said Central Bank's request for capital is “regulatory” in nature while PNB has requested capital for “growth” purposes.

In July, PNB had received government’s approval for capital infusion of Rs 2,816 crore by way of preferential allotment of equity shares, which Kumar said was, for “regulatory purposes”.

Union Finance Minister, Arun Jaitley, on September 25 held an annual review meeting of PSBs to take stock of their respective performances vis-à-vis recovery of non-performing assets, credit offtake and capital needs.

Also read: Banks expect to recover Rs 1.80 lakh cr from NPAs: FM Arun Jaitley

“Whatever profits that banks were making were going towards provisioning. Therefore, on the basis of April-June quarter, banks are projecting (for the quarters to come) declining NPA as recoveries have picked up,” Jaitley said while addressing the media.

Q1FY19 saw lenders recovering close to Rs 36,551 crore, 49 percent higher year-on-year. During 2017-18, banks recovered a total of Rs 74,562 crore.

PSBs have seen severe capital crunch consequent to swelling NPAs. The banks have suffered a cumulative loss of Rs 87,357 crore in 2017-18, with scam-tainted Punjab National Bank registering the highest loss of approximately Rs 12,283 crore.

An official from Bank of Maharashtra said during the review meeting, banks under Reserve Bank of India’s (RBI) prompt corrective action (PCA) requested the government for an early capital disbursal to support their regulatory as well as growth requirement.

During the review meeting, banks also requested the government to look into the minimum threshold of capital suggested by the RBI. Kumar said that banks requested relaxing provisioning norms and "strict" adherence to Basel-III norms.

The RBI’s interpretation of Basel III norms requires banks to maintain a minimum common equity (CET) Tier-I ratio of 5.5 percent of risk-weighted assets. Under the original Basel III guidelines, banks need to set aside a minimum of 4.5 percent of their assets.

Jaitley said banks were “assured” of the “immediate” consideration of the matter.

Kumar said quantum for recapitalisation bond of Rs 65,000 crore will not change for the current fiscal.

Last year, the government announced a recapitalisation package of Rs 2.11 lakh crore to help the ailing PSBs. Out of this, Rs 1.35 lakh crore will come from the sale of recapitalisation bonds and the remaining Rs 76,000 crore will be through budgetary allocation and fundraising from the markets.