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Public sector bank stimulus, who wins?

Reeling under red balance sheet, public sector banks have been given small but much needed breather.

Devina Gupta | July 20, 2016 | Updated 12:50 IST

Reeling under red balance sheet, public sector banks have been given small but much needed breather.

"We have decided to release 75 percent of total budgetary allocation for public sector banks", said Shaktikanta Das, secretary, economic affairs to India Today.

So now 13 public sector banks including SBI, PNB, Dena Bank, Corporation Bank and will have access to  a whopping Rs 22,915 cr.

Interestingly, country's biggest bank the State Bank of India which reported sharpest fall in quarterly profits in 5 years in March due to bad loans gets the largest share of recapitalisation fund at Rs 7575 cr. SBI has been under scanner for not being able to recover nearly 9000 cr loans given by 17 banks consortium to now defunct Kingfisher airlines.

"It was imperative that the recapitalisation fund was given out as lot of weaker banks needed capital for growth urgently. Their risk profile of these banks makes it difficult for them to raise money from elsewhere", said Abheek Barua, Chief economist, HDFC bank

Although the first tranche of Rs 25,000 cr budgetary allocation is a silver lining for the banks, but many like Bank of Maharashtra, Vijaya Bank, Andhra Bank and others have failed to make the cut as well.

"Only banks that have met the required conditions to reduce cost of operations and set targeted growth of deposit and credit goals were given the stimulus", said a finance ministry official

But the real question is if this financial shot in the arm is enough for 13 public sector banks?

"There needs to be two pronged approach with infusion of capital, you need bad loans off the book through asset recovery path", said Abheek Barua, Chief economist, HDFC bank.

 Allahabad Bank Rs 44 crore
 Bank of India Rs 1784 crore
 Canara Bank Rs 997 crore
 Central Bank of India Rs 1729 crore
 Corporation Bank Rs 677 crore
 Dena Bank Rs 594 crore
 Indian Overseas Bank Rs 3101 crore
 Punjab National Bank Rs 2816 crore
 State Bank of India Rs 7575 crore
 Syndicate Bank
 Rs 1034 crore
 UCO Bank Rs 1033 crore
 Union Bank of India Rs 721 crore
 United Bank of India Rs 810 crore
 Total Rs 22915 crore

 

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