Shares of PSU Banks were trading higher after Finance Minister Nirmala Sitharaman announced that Rs 70,000 crore has been allocated for PSU bank recapitalisation in Budget 2019. The Nifty PSU Bank index gained over 1 percent, whereas Nifty Bank rose 0.25 percent post the announcement.

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Central Bank of India gained the most, up 2 percent, followed by Bank of Baroda, Canara Bank, Bank of India, SBI and Oriental Bank of Commerce were up in the range of 1-2 percent.

The FM said Indian banking sector saw Rs 1 lakh crore of NPA resolution and recovery of Rs 4 lakh crore through the IBC mechanism in the last four years.

Sitharaman said six PSU banks have already been brought out of the Prompt Corrective Action (PCA).

The finance ministry has infused Rs 1.06 lakh crore as recap bonds during 2018-19. In the period between FY15 and FY19, the government infused over Rs 2.5 lakh crore in public sector banks largely by issuing recapitalisation (recap) bonds.

The recap bonds were announced in September 2017 and the first tranche of Rs 80,000 crore was issued in January 2018. The Interim Budget made no provision for recapitalisation.

The capital infusion in respective PSU banks will be positive and it will compensate for balance sheet clean-up efforts.

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First Published:Jul 5, 2019 12:47 PM IST