Bank recapitalization plan would increase lending to MSMEs: Fin Min

Union finance minister Arun Jaitley during a press conference in New Delhi on Wednesday

"State Bank of India will get Rs 8,800 crore, Rs 3,571 crore for Oriental Bank of Commerce, Rs 3,045 billion for Dena Bank, Rs 5,158 crore for Central Bank of India, Rs 4,694 billion for Indian Overseas Bank, Rs 9,232 billion for Bank of India", banking secretary Rajeev Kumar said addressing the media.

Among gainers, only IDBI Bank and Bank of India, the two banks that received the most capital, were trading in green, rallying up to 3 per cent on the NSE.

The report suggests that Health Minister JP Nadda had written to Finance Minister Arun Jaitley to enhance this year's Budget allocation on public health by whopping 33 per cent to $10 billion on grounds that the government needed to expand vaccination programmes and free drugs distribution system in the country. The funds will help PSBs meet the regulatory capital ratios under Basel III regulations.

The bank recapitalisation plan revealed yesterday would focus "sharply" on increasing bank lending to the micro, small and medium enterprise (MSME) sector, Ministry of Finance has said. The government has specifically asked the banks to use much of the recap funds for lending to the SME sector.

Analysts had said mandating reforms would be critical to prevent banks from engaging in the same indiscriminate lending that led to the current problems. However, the government, which aims to boost economic growth through investment in roads and other infrastructure avenues, is bound tighten allocation for other sectors considering sluggish growth and dip in revenue generation. "The original decision stands, it has not been reconsidered but then there is always a time in implementing the decision", Jaitley had told mediapersons while unveiling banking sector reforms on January 24.

He said, every deposits of the people in banks are safe as banks are the article of faith.

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It said the average core capitalisation for the state banks would be likely to reflect a cumulative increase of around 140 basis points.

The government will issue recapitalisation bonds of 6-10 years maturity.

"There is no fiscal impact of bond issuance to banks", Mr. Garg said.

Top lender State Bank of India will get 88 billion rupees, while second-biggest state-run lender Punjab National Bank will get 54.73 billion.

Among banks now under the PCA, UCO Bank will get Rs 6,507 crore, Central Bank of India Rs 5,158 crore, Indian Overseas Bank Rs 4,694 crore, Oriental Bank of Commerce Rs 3,571 crore, Dena Bank Rs 3,045 crore, Bank of Maharashtra Rs 3,173 crore, United Bank of India Rs 2,634 crore, Corporation Bank Rs 2,187 crore and Allahabad Bank Rs 1,500 crore.



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