The government Thursday said it will enhance the capital infusion in public sector banks to Rs 83,000 crore, taking the total to Rs 1.06 lakh crore for the fiscal.

The capital will be pumped in over the next few months, Finance Minister Arun Jaitley said, adding that the move will increase the lending capacity of public sector banks (PSBs) as well as help some of them come out of RBI’s watchlist.

The government had earlier announced infusion of Rs 65,000 crore in PSBs in 2018-19, of which Rs 23,000 crore has already been disbursed, while Rs 42,000 crore is remaining.

The government Thursday sought Parliament’s approval for infusion of an additional Rs 41,000 crore.

This amount, sought to be infused in the banks through issue of government securities (recapitalisation bonds), is over and above the Rs 2.11 lakh crore recapitalisation plan announced in October 2017.

The recapitalisation, the finance minister said, will enhance the lending capacity of state-owned banks and help them come out of RBI’s Prompt Corrective Action (PCA) framework.

“Now this Rs 1.06 lakh crore this year and Rs 83,000 crore which is remaining is going to be utilised under four different heads. The first of course is to ensure that banks meet their regulatory capital norms.

“The second will be that the better performing banks under PCA are given capital to achieve a 9 per cent Capital to Risk Weighted Assets Ratio (CRAR) and required capital conservation buffer and the 6 per cent net NPA requirements so that some of them are able to come out of the PCA itself,” he said.

The third category will be the non-PCA banks which are very close to the PCA red-line will be provided capital so that they do not come under the framework, he said.

Some capital will also be provided to banks which are going to be amalgamated to meet regulatory norms and growth capital, Jaitley added.

Earlier this year, the government had announced merger of Dena Bank and Vijaya Bank with Bank of Baroda.

Jaitley also said the non-performing assets (NPAs) recognition, started in 2015, is almost complete, and the September quarter has shown decline in bad loans.

Gross NPAs of PSBs started declining after peaking in March 2018, registering a reduction of Rs 23,860 crore in the first half of the fiscal.

Speaking to reporters, Financial Services Secretary Rajiv Kumar said three banks were on the verge of being included in the PCA, but with this infusion, they will be safe.

A total of 11 out of the 21 PSBs are under RBI’s PCA framework, which imposes lending restrictions on weak banks.

“India’s PCA framework for weaker banks has more onerous thresholds, that is higher capital thresholds and a net NPA threshold that further embeds capital requirement on account of provisioning of NPAs.

“Today’s proposal is an expression of government’s commitment that each PSB is an article of faith, and aims at securing compliance even for the higher regulatory norms,” Kumar said.

Asked if the Nirav Modi scam-hit Punjab National Bank (PNB) will get capital support, he said it could be a candidate for fund infusion.

Kumar said that PSBs have recovered Rs 60,726 crore of bad loans in the first half of the current fiscal year, which is more than double the amount recovered in the corresponding period last year.

In October 2017, the government decided to infuse Rs 2.11 lakh crore in PSBs over the next two years -- through budgetary provisions of Rs 18,139 crore, recapitalisation bonds of Rs 1.35 lakh crore, and the balance through raising of capital by banks from the market.

The government envisaged that PSBs would raise Rs 58,000 crore from the stock markets by March 2019 to meet Basel III norms.

Kumar said out of this, Rs 24,400 crore has been raised by banks so far.

The secretary also said four banks -- SBI, Bank of Baroda, Indian Bank and Vijaya Bank -- may not need capital.