At least six state-owned lenders are receiving Rs 7,577 crore in capital infusion from the government of India, as a part of its plan to strengthen the capital of public sector banks, which have been struggling under huge non-performing assets.
"Government of India has on December 29, 2017 infused share application money of Rs 2,729 crore towards preferential issue of equity capital of IDBI Bank during FY2017-18 under the plan as government's investment," IDBI Bank said in a notice to exchanges.
Similarly, the government is injecting Rs 2,257 crore in Bank of India, the country's sixth biggest lender by assets. Central Bank of India has received Rs 323 crore and Dena Bank has received Rs 243 crore from the government towards contribution in the preferential allotment of equity shares.
Dena Bank said the capital infusion was within the approval of the board obtained on May 9, 2017, to raise Common Equity Tier 1 capital, up to Rs 1,800 crore in one or more tranches.
The government has sanctioned infusion of Rs 1,375 crore in another public sector lender UCO Bank while the Bank of Maharashtra is set to get Rs 650 crore.
"The meeting of the board of directors of the bank will be held on Wednesday, January 3, 2018, to consider the proposal of raising equity capital of the bank by way of preferential allotment of shares to government of India," said Bank of Maharashtra.
India's banking system is stressed with NPAs worth around Rs 9 lakh crore, a large part of which is on the books of public sector banks.
A study by credit ratings agency Care Ratings showed that gross NPAs of state-owned banks stood at 13.4 per cent in the July-September quarter.
Among the public sector banks, IDBI Bank had the highest gross NPA ratio at 24.9 per cent, followed by UCO bank (19.7 per cent), Central Bank of India (17.2 per cent) , Punjab National Bank and Andhra Bank at around 13 per cent.
In a bid to shore up the banks' capital base, the government of India has already announced bold plan to inject a massive Rs 2.11 lakh crore into the ailing PSU banks. This will be done via recapitalisation bonds of up to Rs 1.35 lakh crore, which banks will subscribe to and the government will then to that extent infuse equity in the banks.
The government's plan also involves Rs 58,000 crore fund-raising by banks themselves from the market. Several PSU banks have already initiated plans for the same.
Reserve Bank of India Governor Urjit Patel has said that the bank recap plan will not just depend on the banks' capital requirement, but will also be linked to reforms initiated by the lenders.
"Recapitalisation bonds will be front-loaded for banks that have managed their balance sheet strength more prudently and can use the injected capital to lend besides providing for legacy asset losses," Patel said after the bi-monthly monetary policy conference, earlier this month.
