The finance ministry expects the remaining three public sector banks (PSBs) to be out of the RBI's prompt corrective action (PCA) framework in two months as their financial health has improved.
Indian Overseas Bank, Central Bank of India and UCO Bank are currently under this framework which puts several restrictions on them, including on lending, management compensation and directors' fees.
"In fact, these three banks are also now consistently for the last two quarters... in profit and they are fulfilling by and large all the parameters of the Reserve Bank of India (RBI)," Financial Services Secretary Debasish Panda said.
In any case, he said, "they are lending, they're doing all that businesses but there are some restraints, so that they will be out of that. So we hope that before the close of this financial year (they should be out of PCA)."
He also assured additional capital for these banks if the regulator insists as the government has cushion of the remaining amount of ₹20,000 crore recapitalisation budget for PSBs.
"Although we believe that they are already meeting the regulatory requirement of 11.5 per cent Capital to Risk (Weighted) Assets Ratio (CRAR) so that we will take it forward and we hope that they should also come out from the PCA," he said.
{{/usCountry}}"Although we believe that they are already meeting the regulatory requirement of 11.5 per cent Capital to Risk (Weighted) Assets Ratio (CRAR) so that we will take it forward and we hope that they should also come out from the PCA," he said.
{{/usCountry}}For the current financial year, the government had allocated ₹20,000 crore for capital infusion into the PSBs for meeting the regulatory requirement.
Among the 12 PSBs, Punjab & Sind Bank was given ₹5,500 crore.
Parliament had in September approved the ₹20,000 crore capital infusion in PSBs as part of the first batch of Supplementary Demands for Grants for 2020-21.
With ₹5,500 crore going to Punjab & Sind Bank, the government is left with ₹14,500 crore.