Govt. injects funds into 6 public banks 

Govt. injects funds into 6 public banks 

Context

Injecting funds in the banks

What has happened?

The Centre has released the much-required equity capital to six stressed public sector banks (PSBs) as some of these lenders were on the verge of breaching minimum capital norms on December 31, 2017

Which banks have received the funds?

The PSBs are

• Bank of India (₹2,257 crore)
• Central Bank of India (₹323 crore)
• Dena Bank (₹243 crore)
• IDBI Bank (₹ 2,729 crore)
• Bank of Maharashtra (₹650 crore)
• UCO Bank (₹1,375 crore)

These lenders would be asked to improve on parameters such as bad loans and recovery to which effect a communication would be sent shortly.

Government is sending a message

According to bankers, some of these lenders could have breached the minimum regulatory capital requirement, as mandated by the RBI, at the end of the third quarter. “By infusing capital, the government wants to give a strong signal to the public that it will not allow its banks to go down,” said a senior banker from a PSB

Mandatory conditions for banks

Banks are mandated to maintain minimum 9% capital adequacy ratio (CAR) plus a capital conservation buffer of 2.5%. Within the CAR, minimum common equity tier-I (CET 1) capital ratio is prescribed at 5.5%

Backdrop

All these banks are saddled with huge non-performing assets and are under the prompt corrective action (PCA) framework of the Reserve Bank of India — which means certain operations of these banks have been curtailed by the regulator