State-run lenders require an urgent Rs 1.2 trillion in capital in the next five months and government will have to take a bulk of the tab due to the weak market valuations of these NPA-saddled banks.
The report comes even as the government is asking the Reserve Bank to lower the minimum capital requirements by getting it at par with global practices-something the central bank is uncomfortable to meet.
It has also reported to have turned down the finance ministry demand to transfer Rs 3.6 trillion of its over Rs 9.5 trillion reserves, which government wants to use to recapitalise the bleeding banks.
Most of the 21 state-owned banks have reported huge losses in recent years and a good number of them will be in the red this fiscal as well which will put a strain on the capital.
Currently, 11 PSU banks are under the PCA framework due to large bad loans and this restricts their ability to lend to companies.
With sources hinting at some relaxation from the central bank on that front, CNBC-TV18’s Latha Venkatesh gives details on how these banks have fared in the second quarter earnings.With inputs from PTI.