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Government to inject $3.4 bn into state-run banks

19 July, 2016

The government said on Tuesday it is infusing Rs 22,915 crore ($3.4 billion) in 13 state-run banks in the current financial year, a development that comes as a much-needed lifeline for the lenders struggling due to mounting bad loans.

The capital infusion will help the lenders expand credit operations and raise funds from the market, the finance ministry said in a statement. The infusion is based on an assessment of credit growth for the last five years, banks’ own projections of credit growth and potential for growth, it added.

State Bank of India, the nation’s largest lender, will get the lion’s share of the funds (Rs 7,575 crore). Indian Overseas Bank will get Rs 3,101 crore, Punjab National Bank Rs 2,816 crore and Central Bank of India Rs 1,729 crore.

UCO Bank, Syndicate Bank, Canara Bank, United Bank of India, Union Bank of India, Corporation Bank, Dena Bank, Allahabad Bank and Bank of India are the other banks that will get the money.

The ministry said that it will release 75% of the allocated funds immediately. The remaining disbursal is performance-linked.

Finance Minister Arun Jaitley had, in the budget for 2016-17 announced in February, allocated Rs 25,000 crore to recapitalise state-run banks.

The amount, however, may not be enough to cover the banks’ bad loans. Punjab National Bank, for instance, reported a record quarterly loss by any state-run bank at Rs 5,367 crore for the fourth quarter ended 31 March 2016.

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Government to inject $3.4 bn into state-run banks

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