PSBs to relish govt infusion of Rs 30k crore !

PSB banks have been shining lately on bourses even as broader markets have preferred to stay flat. 

According to media reports the government may infuse Rs 20,000 -30,000 crore in public sector banks later this week with an aim to front-load a plan in view of the surging non-performing assets (NPAs). 

Recent budgetary provision has allocated Rs 25,000 crore for infusing funds in beleaguered sector. Additional funds of Rs 5,000 crore have been seeked through supplementary demand for grants. 

The bad loans as a percentage of gross advances stand at 14.34 per cent for PSBs versus 4.62 per centage for private banks. The total size stands at Rs 7.33 lakh crores for public sector banks and at Rs 82,861 crores for private banks.

As per reports the PSBs have provided for about 55 per cent of gross NPAs against the RBI guideline of 70 per cent. It is expected that there will be tremendous pressure on profitability and capital adequacy of the PSBs if more stressed assets translate into NPAs. This will happen if the slippage increases for the PSBs. 

The centre has announced a Rs 70,000 crore capital infusion plan, spread over four years . In FY16 the government has infused Rs 25,000 K as per plan and the intention is to infuse Rs 10,000 crore each in FY18 & FY19. 

The action on behalf of the government is required as the poor asset quality and weak capitalisation restriction has restricted the lending capacity of the PSBs which threatens to slowdown the economic recovery in the country.