New Delhi:The Union Budget 2020 may allocate Rs 50,000 crore recapitalisation for the banks undergoing a merger to support them through the amalgamation with the anchor banks.
"The merging banks will need support to pull through the merger and are in need of capital at least for three quarters in the next fiscal to meet their overall regulatory capital limits post-merger and not to put pressure on the anchor bank's balance sheet," a source said.
The idea behind the budgetary provision for capital infusion is the merging banks could be in losses and their NPA situation may not dramatically improve and this may disturb the healthy capital base of the anchor banks.
Budget 2019 had allocated Rs 70,000 crore to the public sector banks to be infused to meet their core capital regulatory needs.
Currently, the Indian Overseas Bank, the Central Bank of India, the UCO Bank and the United Bank of India are under the Prompt Corrective Action (PCA) framework due to their poor balance sheet and capital position. They also stand to gain from the recap, sources added.
As per the merger road map, the Punjab National Bank, the Oriental Bank of Commerce and the United Bank of India are to be merged. The newly merged bank will be the second-largest PSB in the country with Rs 18 lakh crore business and the second-largest branch network in India.