The Finance Ministry will take a call on residual Rs 14,500 crore capital infusion in the public sector banks (PSBs) in the fourth quarter of this fiscal, sources said. Following the financial performance review after the first half, sources said, it was found that Punjab & Sind Bank, out of the 12 PSBs, was in need of Rs 5,500 crore to meet the regulatory requirement.
So, the government approved capital infusion through preferential allotment of equity shares in Punjab & Sind Bank last month. The fund was approved from Rs 20,000 crore cleared by Parliament in September for capital infusion of PSBs as part of the first batch of Supplementary Demands for Grants for 2020-21. With Rs 5,500 crore going to Punjab & Sind Bank, the government is left with Rs 14,500 crore.
When the performance review post third quarter numbers takes place, sources said, by that time banks would have clear idea about additional burden on them due to one-time restructuring being undertaken as per the RBI guidelines to help the industry tide over the risk of default due to subdued business environment in the COVID-19 crisis.
Besides, sources said there would be a clarity on NPA recognition as the Supreme Court may decide on interest on interest case by then. NPA recognition process has been halted by the apex court till further order. During 2019-20, the government proposed to make Rs 70,000 crore capital infusion into the PSBs to boost credit for a strong impetus to the economy.
However, the government refrained from committing any capital in the Budget 2020-21 for the PSBs, hoping that the lenders will raise funds from the market depending on the requirements 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 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.