Public sector banks are likely to receive a recapitalisation bonanza in the upcoming union budget presented by union finance minister Nirmala Sitharaman on July 5.

Sources privy to the developments told CNBC-TV18 that the Reserve Bank of India (RBI) may get more powers to regulate non-banking financial companies (NBFCs) and housing finance companies for the first time.

PSU banks have been struggling with high levels of bad debts, as well as huge losses, forcing the government to capitalise them to ensure they meet the prescribed capital norms. However, fiscal constraints are preventing capital infusion over and above what was budgeted.