Banking recapitalisation is acquiring greater urgency, with the
government showing determination to set the house in order at the earliest.
On Thursday, the government sought Parliament approval for
infusion of an additional Rs 41,000 crore in state-owned banks through the
second batch of Supplementary Demands for Grants.
That takes total recapitalisation for 2018-19 to Rs 1.06 lakh
crore, up from Rs 65,000 crore.
Finance Minister Arun Jaitley told reporters on Thursday that
out of Rs 2.11 lakh crore announced earlier for FY18 and FY19, nearly Rs 42,000
crore are still to be deployed in PSU banks.
Banking Secreatry Rajeev Kumar said the funds infusion will
help 4-5 banks come out of RBI's PCA framework in 2018-19.
The funds will be utilised under four different heads: 1) To
help banks meet regulatory capital norms 2) Enable better performing PCA banks
to get capital 3) Infuse funds into non-PCA banks that are closer to the red
line and 4) Give regulatory and growth capital to banks that are being
amalgamated.
Prompt corrective guidelines are a set of rules that put
operational constraints on banks high on bad loans.
Recapitalisation of PSU banks is seen as a near term positive
as it will help banks meet their provisioning needs, regulatory capital norms
and fund growth.
Of late, the news surrounding the government's
recapitalisation drive has kept the lot of PSU banks in good spirits. Nifty PSU
Bank has climbed as much as 9 per cent on the back of government support and
possibility of a few banks exiting PCA set-up.
Expectations of treasury gains have also cheered the stocks
as the bond yield has eased nearly 30 bps in two weeks. Improvement in the bond
space is largely because of easing liquidity pain, lower crude oil prices and
expectations of a rate cut at the next RBI policy meet.
Bank of India, a key bank that is reported to be exiting the
PCA regime, is the top gainer in the PSU bank pack.
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