23,000 Crore Lifeline For PSU Banks Announced, SBI Biggest Gainer.
By navneet mishra On 19 Jul, 2016 At 08:50 AM | Categorized As Business | With 0 Comments

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PCI NEWS:-The government on Tuesday announced the infusion of Rs 22,915 crore in 13 state-run lenders in a bid to boost the liquidity in the banking system. The capital infusion is part of the ‘Indradhanush’ plan under which state-run lenders will get Rs 70,000 crore over four years.

The capital infusion has been necessitated because bad loans have left a $120 billion hole in India’s banking system, forcing lenders to cut down on credit growth, which has hit the economy.

For the current fiscal year, Finance Minister Arun Jaitley has budgeted Rs 25,000 crore for bank recapitalisation. State Bank of India, the country’s biggest lender, will get Rs 7,575 crore, which is nearly one third of the entire amount set aside for bank recapitalization in the current fiscal year. Punjab National Bank will get Rs 2,816 crore, while Bank of India will receive Rs 1,784 crore.

“75 per cent of the amount collected for each bank is being released now to provide liquidity support for lending operations as also to enable banks to raise funds from the market. ┬áThe remaining amount, to be released later is linked to performance, with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations,” the government said in a statement.

Banking analyst Hemindra Hazari said that the current round of fund infusion is a “good starting point” for state-run banks which are reeling under high levels of bad assets.

Shares of PSU banks rose after the fund infusion announcement. The PSU banking sub-index on Nifty rose 1 per cent as compared to a flat Sensex.

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