PSU banks to benefit most from recapitalisation

Government shareholding pattern, size of business and key financial parametres would decide the quantum of share of the state-assisted Rs 20,000-crore recapitalisation package. Mahua Venkatesh reports.

Government shareholding pattern, size of business and key financial parametres would decide the quantum of share of the state-assisted Rs 20,000-crore recapitalisation package.

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According to government sources, most state-owned banks, including Bank of Baroda and Punjab National Bank, would benefit from the recapitalisation booty.

The government is yet to decide on the share of the individual packages for the banks.

“We are yet to finalise the nitty gritty but almost all banks will benefit from this package,” a senior government official who did not wish to be identified said, adding that the decision would be taken on the basis of the overall financial status and performance of the individual banks.

Banks like Punjab and Sind Bank, UCO, Vijaya Bank, Bank of Maharashtra, Dena Bank are expected to benefit the most from the package. This would also facilitate them in adopting the stringent Basel II norms, which include tighter risk management guidelines. Though Punjab and Sind Bank is yet to be listed, it will get recapitalised to strengthen its financial position.

The government has also asked banks to increase their credit growth target in a bid to keep the growth story on track. Banks would now have to record a credit growth of 24 per cent for the current fiscal against 20 per cent set earlier. The capital injection would help banks in increasing their credit activity while further easing the liquidity situation.