Stage set to free some banks from PCA regime

PSBs facing capital deficiency likely to benefit first

NEW DELHI: Stage is getting set for some relatively good public sector banks to escape the fold of prompt corrective action (PCA) after the Finance Minister Arun Jaitley announced Thursday an additional Rs41,000 crore capital infusion in some PSU banks.

Currently, 12 banks with deficiency in capital base, inability to generate return on assets and high bad debts are under the PCA regime. While 11 banks are from the PSU group, the lone privates sector bank is the Thrissur-based Dhanlaxmi Bank.

On direction from the central government, the RBI’s Board for Financial Supervision (BFS) is expected to meet soon on the issue.

Jaitley said he expected a few public sector banks (PSBs) to leave PCA regime after the fresh infusion of capital. He said providing capital to better performing PCA banks to achieve 9 per cent capital to risk weighted asset ratio (CRAR) and 1.875 per cent Capital Conservation Buffer could be done through this capital infusion.

“Some banks need to bring the net NPA ratio below the six per threshold to facilitate them to come out of PCA,” Jaitley told reporters about the target of the government’s capital infusion in PSU banks.

The government had earlier in the day presented in the Lok Sabha the second Supplementary Demands for Grants for 2018-19 for gross additional expenditure of Rs85,948.86 crore which includes Rs. 41,000 crore for recap of the PSBs.

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