Money & Banking

Govt approves ₹48,239-cr recap bonds in 12 PSBs

Our Bureau New Delhi | Updated on February 20, 2019 Published on February 20, 2019

Allahabad Bank and Corporation Bank set to come out of RBI’s PCA framework

The decks are now cleared for two more public sector banks – Allahabad Bank and Corporation Bank – to exit the RBI’s Prompt Corrective Action framework, with the Centre, on Wednesday, announcing ₹15,982-crore capital infusion in these two lenders as recap bonds.

This forms part of the massive ₹48,239-crore recap funds (to come as bonds), approved for 12 public sector banks by the Finance Ministry.

The recap approval and the individual allocations for these 12 banks were disclosed in a tweet by DFS Secretary Rajeev Kumar on Wednesday.

It may be recalled that three banks – Bank of Maharashtra, Oriental Bank of Commerce and Bank of India – had, on January 31, come out of the PCA framework.

The latest recap bonds broadly fall into four categories – equipping better-performing PCA banks to be above regulatory PCA thresholds to help them come out of the framework (Allahabad Bank, Corporation Bank); non-PCA banks that are close to the red line to ensure they don’t fall into PCA (Punjab National Bank, Union Bank, Syndicate Bank and Andhra Bank); PCA banks that have exited PCA to remain above PCA triggers (Bank of India, Bank of Maharashtra), and other PCA banks that need to meet minimum regulatory capital norms (Central Bank, United Bank, UCO Bank and Indian Overseas Bank).

Bank-wise allocation

Two banks – Allahabad Bank (₹6,896 crore) and Corporation Bank (₹9,086 crore) – have got ₹15,982 crore to equip these better-performing PCA banks to be above the regulatory PCA thresholds.

Also, ₹14,879 crore has been infused into four banks (PNB, Union Bank, Andhra Bank and Syndicate Bank) to ensure that these non-PCA banks continue to remain above the regulatory capital norms of PCA.

While Punjab National Bank has received ₹5,908 crore recap, Union Bank and Andhra Bank have got ₹4,112 crore and ₹3,256 crore, respectively. Syndicate Bank has received ₹1,603 crore.

The Centre has also pumped in ₹4,843 crore into two PSBs – Bank of India and Bank of Maharashtra – which recently exited PCA to remain above PCA triggers. While Bank of India has got ₹4,638 crore, Bank of Maharashtra has been allocated ₹205 crore.

Four PSBs – Central Bank, United Bank, UCO Bank and Indian Overseas Bank – have been given ₹12,535 crore to help them meet minimum regulatory norms. While Central Bank has been allocated capital of ₹2,560 crore, Indian Overseas Bank has got ₹3,806 crore. The recap on United Bank is ₹2,839 crore and, in the case of UCO Bank, the recap is ₹3,330 crore.

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Published on February 20, 2019
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