The Finance Ministry is likely to provide capital support from the Rs 20,000 crore fund approved by Parliament in recently concluded session to some Public Sector Banks (PSBs) in the third quarter itself.
Parliament approved Rs 20,000 crore for PSB capital infusion as part of the first batch of Supplementary Demands for Grants for 2020-21 which sought additional spending of a record Rs 2.35 lakh crore primarily to meet expenses for combating the COVID-19 pandemic.
The fund infusion would be for meeting regulatory capital requirements if the need arises in October-December quarter, sources said. The second quarter result will give an idea as to which bank may require regulatory capital and accordingly recapitalisation bonds would be issued to them, sources said.
Besides, state-owned banks already have shareholders' approval for raising capital through a mix of equity and bonds during the current fiscal. It is to be noted that the government refrained from committing any capital in the Budget 2020-21 for PSBs, hoping that lenders will raise funds from the market depending on the requirement.
In 2019-20, the government infused Rs 70,000 crore into PSBs to boost credit for a strong impetus to the economy. In the last financial year, Punjab National Bank got Rs 16,091 crore, Union Bank of India received Rs 11,768 crore while Canara Bank and Indian Bank got Rs 6,571 crore and Rs 2,534 crore, respectively. Allahabad Bank received Rs 2,153 crore, United Bank of India got Rs 1,666 crore and Andhra Bank received Rs 200 crore. These three lenders have been merged with various PSBs.
Besides, Bank of Baroda got a capital infusion of Rs 7,000 crore, Indian Overseas Bank received Rs 4,360 crore and UCO Bank got Rs 2,142 crore. Punjab & Sind Bank received Rs 787 crore and Central Bank of India got Rs 3,353 crore. In addition, LIC-controlled IDBI Bank received additional capital of Rs 4,557 crore.