The lenders, which include State Bank of India, account for more than two-third of the country's banking assets as well as most of the over Rs 8 lakh crore of non-performing assets (NPAs) or bad loans.
"The fresh capital with government's support and fund raising through QIP will help in strengthening our balance sheet and give a boost to our core operations," Bank of Maharashtra managing director and CEO, R P Marathe, said in a statement today.
He said the bank will continue to focus on the retail business and SME as it has built significant operational expertise in these segments. Indian Overseas Bank in a statement today said, "The
capital infusion is a welcome move and will facilitate it to meet regulatory requirements and provide fair headroom for growing credit."
The capital infusion is part of the massive Rs 2.11 lakh crore bank recapitalisation plan announced by the government in October last year. It is spread over two fiscals -- 2017-18 and 2018-19.
The finance ministry will raise Rs 80,000 crore through recapitalisation bonds and provide another Rs 8,139 crore from the Budget to recapitalise the banks. Global rating agency Moody's said the government's commitment to recapitalise all PSBs is credit positive for the weaker lenders.
"This announcement is a credit positive for all the public sector banks, and especially the weaker ones, as the government has made it very explicit that it will ensure that all public sector banks meet the minimum regulatory capital requirements," Moody's Investors Service's vice president (financial institutions group) Srikanth Vadlamani said.
While some of the changes are steps in the right direction, they are not meaningful enough to address the structural corporate governance issues facing these banks, he said.
Care Ratings said the plan addresses regulatory capital requirement of all PSBs and provides a significant amount towards growth capital for increasing lending to the economy.
"For banks in the non-prompt corrective action (PCA) category, the capital will help further growth in credit as they do not need to provide for regulatory capital. This is good for the economy," Care Ratings said in a note.
"Given the strict monitoring conditions spoken about, there would be better credit appraisal in pre-sanction stage as well as robust monitoring post sanction," Care Ratings said.
Another domestic rating agency, Crisil Ratings said the government's explicit note asking public sector banks to become more MSME-friendly is an important step, given the footprint and role of small enterprises.
"With formalisation of the economy gathering pace after GST, assessing MSME creditworthiness, which has been somewhat challenging for banks in the past, can become easier through data analytics and adequate risk practices," Crisil said.
During the current fiscal, IDBI Bank will get highest infusion of Rs 10,610 crore, followed by State Bank of India (Rs 8,800 crore) and Bank of India (Rs 9,232 crore).
UCO Bank will get Rs 6,507 crore; Punjab National Bank - Rs 5,473 crore; Bank of Baroda - Rs 5,375 crore; Central Bank of India - Rs 5,158 crore; Canara Bank - Rs 4,865 crore; Indian Overseas Bank - Rs 4,694 crore and Union Bank of India- Rs 4,524 crore.
Oriental Bank of Commerce would get Rs 3,571 crore; Dena Bank - Rs 3,045 crore; Bank of Maharashtra - Rs 3,173 crore; United Bank of India - Rs 2,634 crore; Corporation Bank Rs 2,187 crore; Syndicate Bank - Rs 2,839 crore; Andhra Bank - Rs 1,890 crore; Allahabad Bank - Rs 1,500 crore, Punjab and Sind Bank - Rs 785 crore.
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