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Recapitalisation Plan: Govt To Infuse Rs 7,577 Cr In 6 Weak State-Run Banks Under Indradhanus Plan

The actual fund infusion will take place in the next few weeks after they get necessary regulatory approval, including a nod from shareholders

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The finance ministry has approved the proposal for infusion of Rs 7,577 crore in 6 weak public sector banks (PSBs) as part of the recapitalisation plan to bolster capital adequacy ratio. All these banks, which got capital support, are under the prompt corrective action of the Reserve Bank of India. The funding comes under Indradhanus plan of the government which promised Rs 70,000 crore over a period of four years ending March 2019.

Lenders, which will receive capital through the preferential issue of shares, include Bank of India, IDBI Bank, and UCO Bank. The actual fund infusion will take place in the next few weeks after they get necessary regulatory approval, including a nod from shareholders. Kolkata-based UCO Bank on Wednesday announced approval of the board for the proposal to issue equity shares on preferential basis to the government against the capital contribution of Rs 1,375 crore subject to necessary approval.

Besides, Central Bank of India said the capital raising committee of the board approved raising of equity capital by allotting up to 3.88 crore shares at the issue price of Rs 83.15 per unit aggregating to Rs 323 crore. At the same time, the government has decided to infuse Rs 2,257 crore in the Bank of India, Rs 2,729 crore in IDBI Bank, Rs 650 crore in Bank of Maharashtra, and Rs 243 crore in Dena Bank.

While the government decides the mode for recapitalisation of all state-run banks, it advanced the release of funds to these six banks to help them meet their equity requirements and enable them to resume normal business and help them come out of prompt corrective action.

Finance Minister Arun Jaitley in October had announced an unprecedented Rs 2.11 lakh crore two-year roadmap to strengthen PSBs, reeling under high non-performing assets (NPAs) or bad loans. Their NPAs have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.75 lakh crore in March 2015. The plan includes floating recapitalisation bonds of Rs 1.35 lakh crore and raising Rs 58,000 crore from the market by diluting governments stake.

The government is working on the modalities for issuing the recapitalisation bonds as it aims to front-load the infusion with an aim to strengthen the state-owned banking sector, sources said, adding that the announcement in this respect, including detailed guidelines, will be made during this month.

Jaitley had also announced that banks would get about Rs 18,000 crore under the Indradhanush plan over the next two years. Under the Indradhanush roadmap announced in 2015, the government had announced infusion of Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the market to meet their capital requirement in line with global risk norms, known as Basel-III.

In the last three-and-a-half years, the government pumped Rs 51,858 crore capital in the PSBs. The remaining Rs 18,142 crore will be injected into the banks over the next two years.