Govt infuses Rs22,915 cr in 13 PSU banks; SBI gets Rs7,575 cr

The government on Tuesday allocated Rs22,915 crore in fresh capital to 13 state-run lenders, in a bid to boost liquidity in the banking system. The capital infusion is part of the 'Indradhanush' plan under which state-run lenders will get Rs70,000 crore over four years.

The capital infusion has been necessitated because of bulging bad loans that have left a Rs80,000-crore hole in India's banking system, which in turn hit economic activity as lenders refused to expand credit.

The capital infusion exercise for the current year is based on an assessment of the need based on the CAGR of credit growth for the last five years, banks' own projections of credit growth and an objective assessment of the potential for growth of each public sector bank, a finance ministry release stated.

Banks will get 75 per cent of the allocated amount on an immediate basis, which would provide them liquidity support for lending operations and help them raise additional resources from the capital market.

The 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.

Under the government's Indradhanush plan to revamp public sector banks, the state-run banks were promised an infusion of Rs 70,000 crore over four years to help them meet their recapitalisation needs. While Rs 25,000 crore was disbursed in the previous fiscal, after this infusion, the state banks will receive Rs 10,000 crore each in the next two years.