The government has provided over Rs 7,500-crore fresh equity to six stressed state-run banks to help them meet the prescribed regulatory capital requirement and state its commitment to keep banks well-funded.
Bank of India, IDBI Bank, Uco Bank, Bank of Maharashtra, Dena Bank and Central Bank of India have received equity through preferential issue of shares with two of them informing stock exchanges about the decision.
When contacted, financial services secretary Rajiv Kumar confirmed the development. “Banks will not suffer due to shortage of regulatory capital. But we will monitor their functioning to ensure that they undertake clean, responsible and prudent business to enhance stakeholder value,” he told TOI.
The details of the monitoring plan are expected to be announced shortly. While announcing a mega Rs 2.11-lakh-crore recapitalisation plan, finance minister Arun Jaitley had said strict conditions will be put in place to avoid a repeat of unbridled lending that has resulted in record non-performing assets (NPAs) for Indian banks, especially those in the public sector. At the same time, it is working on an incentivising the better performers.
The six banks are on the list of players that are part of prompt corrective action initiated against state-run lenders whose performance has slipped due to a pile-up of bad debt.
While the government decides the mode for recapitalisation of all state-run banks, it advanced the release of funds to these six to help them meet their equity requirements and enable them to resume normal business.
Uco Bank informed the stock exchanges that on Thursday, the finance ministry communicated its sanction for release of Rs 1,375 crore towards preferential allotment of equity shares. Similarly, IDBI Bank has received Rs 2,729 crore. In the Union Budget, the government had budgeted for Rs 10,000 crore for recapitalisation of public sector banks but, given the increase in NPAs, the allocation is set to be enhanced in the next Budget.