To boost the financial health of banks under the RBI’s prompt corrective action (PCA) scheme, the Finance Ministry is expected to infuse Rs 14,500 crore. The capital infusion will help these banks to come out of the Reserve Bank of India’s enhanced regulatory supervision or PCA framework.
The ministry has almost finalised its names of probable candidates for capital infusion, sources said.
The infusion will be made in the next few days, the sources said, adding the biggest beneficiary of this round of capital infusion would be the banks that are under the prompt corrective action (PCA).
The Capital Infusion Will Help These Banks To Come Out Of PCA Framework.
Indian Overseas Bank, Central Bank of India and UCO Bank are currently under this framework that puts several restrictions on them, including on lending, management compensation and directors’ fees. The capital infusion will help these banks to come out of the Reserve Bank of India’s enhanced regulatory supervision or PCA framework.
Most of the large state-owned lenders — including State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, and Indian Bank — have already raised money from various market sources, including share sale on a private
The ministry has almost finalised its names of probable candidates for capital infusion, sources said.
The infusion will be made in the next few days, the sources said, adding the biggest beneficiary of this round of capital infusion would be the banks that are under the prompt corrective action (PCA).
Government Had Allocated Rs 20,000 Crore For Capital Infusion Into The PSBs
The government has planned to allocate Rs 20,000 crore for capital infusion into PSBs to fulfil regulatory requirements for the current financial year. Among the 12 PSBs, Punjab & Sind Bank was given Rs 5,500 crore in November last year. As part of the first batch of Supplementary Demands for Grants for 2020-21, Parliament approved a Rs 20,000 crore capital infusion in the PSBs in September. After nearly four years, the LIC-controlled IDBI Bank was excluded from the RBI’s PCA system due to improved financial performance.
In May 2017, the Reserve Bank of India (RBI) put IDBI Bank under the PCA system after it failed to reach the capital adequacy, asset quality (net NPAs were over 13% in March 2017), return on assets, and leverage ratio thresholds. The Board for Financial Supervision (BFS) evaluated IDBI Bank’s results at its meeting on February 18, 2021. The RBI said that the bank is not in breach of the PCA criteria on regulatory capital, net NPA, or leverage ratio, according to reported results for the quarter ending December 31, 2020.
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