State-run banks in demand

Shares of 19 public sector banks rose by 3.57% to 30.74% at 10:29 IST on BSE after the finance ministry announced a Rs 2.11 lakh crore bank recapitalisation plan for state-owned lenders.

Meanwhile, the S&P BSE Sensex was up 242.02 points, or 0.74% to 32,849.36.

Punjab National Bank (up 30.74%), Bank of Baroda (up 23.44%), Bank of India (up 21.04%), Union Bank of India (up 20.82%), Canara Bank (up 19.48%), State Bank of India (up 17.07%), IDBI Bank (up 16.21%), Corporation Bank (up 14.43%), UCO Bank (up 14.24%), Indian Bank (up 12.6%), United Bank of India (up 12.43%), Andhra Bank (up 11.28%), Allahabad Bank (up 10.66%), Syndicate Bank (up 9.90%), Bank of Maharashtra (up 9.49%), Central Bank of India (up 9.22%), Vijaya Bank (up 7.23%), Punjab & Sind Bank (up 6.14%) and Dena Bank (up 3.57%), edged higher.

The government has decided to take a massive step to capitalise public sector banks (PSBs) in a front-loaded manner, with a view to support credit growth and job creation. This entails mobilization of capital, with maximum allocation in the current year, to the tune of about Rs 211000 crore over the next two years, through budgetary provisions of Rs 18139 crore, recapitalisation bonds to the tune of Rs 135000 crore, and the balance through raising of capital by banks from the market while diluting government equity (estimated potential Rs 58000 crore), Ministry of Finance said in a statement after market hours yesterday, 24 October 2017.

Government actions are not limited to addressing capitalisation of PSBs. Definite steps will be taken alongside capitalisation to enable them to play a major role in the financial system. PSBs having 70% market share in the banking space will be geared for greater growth and to contribute through enhanced credit off-take. The stage has been set with a 'MUDRA Protsahan' campaign across the country, the statement said.

There will be a strong push on enabling growth of micro- small and medium enterprises (MSMEs) through enhanced access to financing and markets, and a drive to finance MSMEs in 50 clusters. The recapitalisation and the initiatives announced on Tuesday, 24 October 2017, are expected to have a noticeable impact in the near-term, contributing to accelerated economic activity, employment and growth of the economy, it added.

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