PSU banks gain as govt announces Rs 48,239-cr recapitalisation

The Nifty PSU Bank index rose over 1 percent led by gains in Central Bank of India, PNB, Bank of India, Union Bank of India, Syndicate Bank, Vijaya Bank as well as SBI after the government announced final recapitalisation tranche amount of Rs 48,239 crore for as many as 12 public sector banks.

The 12 banks are Allahabad Bank, Corporation Bank, Bank of India, Bank of Maharashtra, Punjab National Bank, Union Bank, Andhra Bank, Syndicate Bank, Central Bank, United Bank, UCO Bank and IOB.

The government had initiated a mega recapitalisation drive in October 2017 announcing infusion of Rs 2.11 lakh crore in banks by way of capital. Of this Rs 1.35 lakh crore was through recap bonds, Rs 18,000 crore via budgetary support and rest as to be raised via market operations.

As of December 2018, government infused Rs 51,533 crore via budgetary allocation and recap bonds.

“With the final tranche, PSU banks are adequately capitalised. The pricing power remains strong and the credit cycle is normalising. The move is positive for corporate banks,” Nomura said in a report.

“The global investment bank prefers corporate private banks. It has a buy call on ICICI Bank, Axis Bank & SBI. From the Rs 80,000 crore infused in H2, over 75 percent has gone to PCA banks cap issues,” it said.

Under the PCA framework lending ability of as many as 11 PSBs was contained by the RBI when they were put under the framework.

The restrictions under the framework, which included a restriction on dividend distribution, restriction on branch expansion, restriction on management compensation and director’s fees, could be imposed as and when the banks would breach various regulatory threshold limits.
First Published on Feb 21, 2019 09:51 am

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