NEW DELHI: The government plans to pump about Rs 83,000 crore into state-run banks by the end of this financial year as it looks to revive their finances and put credit growth back on a sound footing.The money will be infused strategically — to support lenders under the Reserve Bank’s prompt corrective action ( PCA ) regime that have shown improvement and to shore up others that are at risk of slipping into the programme.PCA imposes lending and other curbs on weak banks until their financial health can be restored. The funds will go to five banks out of a total 11 to help them exit PCA. They will also go to about three banks, including the scam-hit Punjab National Bank ( PNB ), that are in danger of breaching PCA thresholds. Banks with robust balance sheets such as State Bank of India and those at the weakest end of the spectrum will be excluded from this round of infusions.“The ones in the middle, which are either likely to go down, or which can come up — that’s the category being helped,” FM Arun Jaitley told reporters. “Those that are very strong (and those) where there will be no gain after investing, are not being given capital.” Bank of Baroda, Dena Bank and Vijaya Bank, which are in the process of being merged, will also be given capital to bolster the resultant entity.Some other banks not included in these three categories but short of the regulatory capital requirement will also get support. The exact allocation to each bank will be decided by the Department of Financial Services. “This entire exercise would also lead to improvement in the lending capacity of banks,” Jaitley said.The government had originally pledged to infuse Rs 65,000 crore into state-run banks this fiscal year. Of this, banks have already received or raised on their own Rs 23,000 crore, leaving Rs 42,000 crore yet to be allocated. On Thursday, the government sought from Parliament another Rs 41,000 crore for supporting banks in its supplementary demand for grants.The latter two amounts add up to Rs 83,000 crore, taking the total infusion for the fiscal year to Rs 1.06 lakh crore (Rs 65,000 crore+ Rs 41,000 crore). The Rs 83,000 crore will include funds raised through the sale of recapitalisation bonds apart from money raised by banks from the market and the sale of non-core assets.CARE Ratings said in a note that the capital infusion is unlikely to have an impact on the fiscal deficit as the recapitalisation bond route will be used. The government sought a total Rs 85,948.86 crore as supplementary demand for grants, which means about half of it is for bank capital infusion. That includes Rs 2,345 crore for the Air India turnaround plan. ET had reported last month that the government is likely to step up capital support to state-run banks to Rs 80,000-1 lakh crore.This infusion for weak banks comes as the government is trying to get RBI to relax the PCA regime, reasoning that this is causing a credit slowdown, thus hurting growth, investment and job generation. “On the basis of assessment, we have kept a provision of giving capital to four-five banks,” said financial services secretary Rajeev Kumar. The exact allocation will be decided based on second and third-quarter results.Banks that have slashed their non-performing loans to 6% of the total will be given required capital support. Lenders will be given additional infusions to achieve a 9% capital to risk-weighted asset ratio and 1.875% capital conservation buffer, lifting them to the required 10.875% of capital. Banks that are in breach of some of the PCA thresholds and at risk of slipping into this regime will be given similar levels of capital.The government pointed out that RBI’s capital norms are stiffer than those prescribed under the Basel norms but reiterated its commitment to “securing compliance even for the higher regulatory norms”.Jaitley said the bad-loan recognition process has made considerable progress and non-performing assets (NPAs) had peaked. “Hopefully, the last quarter has already shown that there is an improved performance. Therefore, now the downward slide in the NPAs itself would now commence,” the finance minister said.Such assets have declined from a peak of 7% in March 2015 to 0.59% in September 2018. Gross NPAs declined by Rs 23,860 cr in the first half of the current fiscal from March 2018 levels. Non-NPA accounts overdue by 31-90 days at state-run banks are down 61% over five quarters.