New Delhi,
The Central government today announced Rs 88,139-crore recapitalisation package for public sector banks which has the potential to boost credit offtake by an additional Rs 5 lakh crore. The government linked this money to a reforms package that includes curbing imprudent lending to the corporate sector.

The PSU bank roadmap also stressed that “each public sector bank is an article of faith”. Rajeev Kumar, Secretary, Department of Financial Services, said depositors’ money is safe and no bank will fail.

While in terms of direction, there are stricter norms for corporate loans, banks have been asked to reorient towards the MSME sector. Kumar said the MSMEs are employment generators and have started integrating from informal to formal sector and thus MSME lending will be a focus area for the banks.

The capital infusion plan for 2017-18 includes Rs 80,000 crore through recap bonds and Rs 8,139 crore as budgetary support. This plan addresses regulatory capital requirement of all public sector banks and provides a significant amount towards growth capital for increasing lending to the economy.

Finance Minister Arun Jaitley said the government inherited a major problem on bank NPAs. “We inherited a very major problem and, therefore, we have been involved in finding a solution to that problem”, he said, adding that “our role really is not only to find a solution but also to create an institutional mechanism to make sure what happened in the past is not repeated”.

The capital allocation is divided on the stronger banks on non-PCA banks who will get funds to drive credit growth. These include SBI — Rs 8,800 crore, PNB —Rs 5,473 crore, BoB — Rs 5,375 crore, Canara Bank — Rs 4,865 crore, Union Bank — Rs 4,524 crore, Syndicate Bank — Rs 2,839 crore, Andhra Bank — Rs 1,890 crore, Vijaya Bank — 1,277 crore and P&SB Rs 785 crore.

For the PCA or Prompt Corrective Action (PCA) category of banks or those under the RBI watch list, the funds have been given for meeting regulatory capital requirements. These include IDBI Bank — Rs 10,610 crore, BoI — Rs 9,232 crore, UCO Bank — Rs 6,507 crore, CBI — Rs 5,158 crore, IOB — Rs 4,694 crore, OBC — Rs 3,571 crore, Dena Bank — Rs 3,045 crore, BoM — Rs 3,173 crore, UBI — Rs 2,634 crore, Corporation Bank — Rs 2,187 crore and Allahabad Bank — Rs 1,500 crore.