PSU banks capital infusion

Recently Government approved capital infusion of Rs. 48,239 cr into 12 PSU bank. This step is taken to aid them in meeting capital requirements and accelerate lending to boost growth (especially to small businesses).

With this capital infusion, government has approved total infusion of Rs. 1,89,000 cr out of 1,94,000 cr; keeping the remaining Rs. 5,000 cr for any last minute contingency (including amalgamated entity of Bank of Baroda). The move is part of the ₹2.1 trillion bank recapitalization plan announced in October 2017 to improve the health of the banking sector struggling with a pile of toxic assets. Official data shows that scheduled commercial banks had ₹10 trillion of gross NPAs at the end of December 2018.

Reason for this action:

  1. To provide minimum regulatory capital to banks that come under Reserve Bank of India’s prompt corrective action (PCA) framework
  2. To prevent shaky banks from breaking the framework’s triggers.
  3. This step along with RBI reducing interest rates by 25 basis points is in line with government taking measures to improve access to credit to job-creating sectors of the economy and to stimulate economic growth.

The following table explains the impact of the capital infusion on the respective banks:



Capital Infusion

(Rs. Cr)

Aid PSBs that were withdrawn from PCA to remain above PCA triggers


Bank Of India


Bank Of Maharashtra


Support PSBs in meeting the required edge of 7.375% of common equity tier-1  ratio, 8.875% tier-1 ratio, 10.375% capital to risk weighted asset ratio and bring down net non-performing assets lower than 6%.


Corporation Bank


Allahabad Bank


Help PSBs to meet minimum regulatory capital norms for CET 1, tier 1 and Capital to risk assets ratio.


Indian Overseas Bank


UCO Bank 


United Bank of India


Central Bank Of India


Help Non PCA PSbs from violating thresholds of the PCA framework


Punjab National Bank


Union Bank Of India 


Andhra Bank 


Syndicate Bank 





When 11 PSUs were put under the PCA framework, their lending ability was contained by RBI. The restrictions under the framework, that comprises of restriction on branch expansion, limitation on dividend distribution, restriction on management compensation and director’s fees, could be imposed as and when the banks would break various regulatory threshold limits. It is expected that this measure would help banks become ‘strong’ and enable them to absorb losses if their NPAs increase; and finally equip them to start lending again.


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