PNB gets lion’s share of recapitalisation

Finance Minister Nirmala Sitharaman on Friday laid out the broad strokes for the recapitalisation plan for public sector banks, providing the approximate allocation breakup for about ₹55,000 crore of the ₹70,000 crore promised in the Budget.

Ms. Sitharaman, while speaking at a press conference to announce the merger of 10 public sector banks into four entities, said that the final figures for the allocation would be decided following consultation with the banks themselves, but that the figures provided on Friday were reasonably accurate.

Finance Secretary Rajiv Kumar said, as of now, the recapitalisation amount would remain at ₹70,000 crore, and added that the mergers announced on Friday were all that the government had envisaged so far.

“As the Finance Minister said, the government is fully committed to making the banks robust,” Mr. Kumar said at the press conference. “However, after seeing the fundamentals of the banks before and after the merger, we see no reason for the recapitalisation amount to exceed the ₹70,000 crore announced.”

“As of now, the roadmap for mergers is final,” Mr. Kumar added. “Twelve is the right number of banks which should remain.” Punjab National Bank, which will now be merged with Oriental Bank of Commerce and United Bank, will receive the highest share of the capital infusion of about ₹16,000 crore. Union Bank of India, which is to be merged with Andhra Bank and Corporation Bank, will receive about ₹11,700 crore.

Punjab National Bank will, post-merger, become the second-largest bank in the country, after State Bank of India. The amalgamated Union Bank of India will become the fifth-largest bank.

Bank of Baroda, which had earlier been merged with Dena Bank and Vijaya Bank, will likely receive ₹7,000 crore, and will be the third-largest bank in India.

Canara Bank, to be merged with Syndicate Bank, will receive about ₹6,500 crore of the capital infusion. It will be the fourth-largest bank in India, post-merger. Indian Bank, which will be merged with Allahabad Bank, will receive about ₹2,500 crore, and will be the seventh-largest bank.

The government also announced the tentative recapitalisation breakup for the remaining smaller banks. Of these, Indian Overseas Bank is to receive about ₹3,800 crore, Central Bank of India ₹3,300 crore, UCO Bank ₹2,100 crore, United Bank of India ₹1,600 crore, and Punjab & Sind Bank will get about ₹750 crore.

The Finance Minister had announced the ₹70,000 crore recapitalisation package for public sector banks in the Budget, and had said that given the stronger financials of the banking sector, this amount would be used as growth capital and to increase credit outflow.