State-Run Banking Stocks Jump After Government Announces Fund Infusion

State-run banking shares jumped on Thursday, a day after the government said it will inject Rs 48,239 crore ($6.79 billion) into some lenders as part of its recapitalisation programme. The government had in October 2017 said it would infuse a total Rs 2.11 lakh crore into state-run lenders over two years in return for them implementing reforms, in a bid to boost lending and tackle a record bad debt problem.

The government approved the amount for 12 state-controlled lenders on Wednesday as it aims to equip better-performing banks which are under the prompt-corrective action list (PCA), financial services secretary Rajeev Kumar tweeted.

The Reserve Bank of India has put some state-owned lenders with high levels of bad debt and inadequate capital on the PCA list, barring them from issuing fresh big-ticket loans and expanding their operations.

Allahabad Bank will get Rs 6,896 crore, the government said. Corporation Bank will receive Rs 9,086 crore, sending its shares nearly 20 per cent higher in its biggest daily percentage gain since October 2017.

The Nifty PSU bank index rose as much as 1.7 per cent, but pared gains and was last up 0.9 per cent.

Indian Overseas Bank, United Bank of India and UCO Bank rose 6-7 per cent each. Central Bank Of India and Andhra Bank advanced about 5 per cent each, while Allahabad Bank was up 4 per cent. Union Bank of India, Bank of India and Punjab National Bank added 2-4 per cent each.

($1 = Rs 71.0325)