PSU Banks Plan To Mobilise Rs 58,000 Crore From Capital Markets In FY18

Public sector banks, including State Bank of India, Bank of Baroda and IDBI Bank, plan to raise Rs 58,000 crore through equity dilution during the current fiscal to meet Basel-III norms and clean up their balance sheets.

Leading the pack is the country's largest lender SBI which plans to raise Rs 15,000 crore through a qualified institutional placement (QIP) which is likely to be completed by the year-end.

"This is something for which we have everything in place but will go [for] when we find the market is conducive," SBI Chairman Arundhati Bhattacharya said.

Besides SBI, Bank of Baroda and Central Bank of India plan to raise Rs 6,000 crore and Rs 65,000 crore, respectively, from the capital markets.

Oriental Bank of Commerce and IDBI Bank received approval from their respective boards to raise Rs 5,000 crore each through equity dilution, while Mumbai-based Union Bank of India plans to Rs 4,950 crore during the current fiscal.

Corporation Bank and Syndicate Bank plan to raise Rs 3,500 crore each, while Bank of Maharashtra recently got board approval for raising Rs 2,000 crore. Canara Bank had also raised about Rs 1,250 crore from rights issue to its shareholders last fiscal.

Raising funds from the market will ease the pressure on the exchequer of pumping in capital. As per the Indradhanush plan, public sector banks need to raise Rs 1.10 lakh crore from markets, including follow-on public offer, to meet Basel-III requirements, which will kick in from March 2019.

This will be over and above Rs 70,000 crore which banks will get as capital support from the government. The government has already infused Rs 50,000 crore in the past two fiscals and the remaining will be pumped in by the end of 2018-19.

Bad Loans Pile Up

In the Budget speech on February 1, Finance Minister Arun Jaitley had announced capital infusion of Rs 10,000 crore for the current fiscal. "In line with the Indradhanush road map, I have provided Rs 10,000 crore for recapitalisation of banks in 2017-18. Additional allocation will be provided, as may be required," Jaitley had said.

PSU banks requires capital for meeting Basel-III norms and cleaning of balance sheet as non-performing assets (NPAs) have reached unacceptably high levels. These banks are saddled with NPAs or bad loans to the tune of Rs 6 lakh crore.

Bad loans rose by over Rs 1 lakh crore in the first nine months of last fiscal to Rs 6.07 lakh crore by December 31, 2016. Gross NPA of PSBs stood at Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore at the end of March 2015.