Public sector bank stimulus, who wins?

Reeling under red balance sheet, public sector banks have been given small but much needed breather.

"We have decided to release 75 percent of total budgetary allocation for public sector banks", said Shaktikanta Das, secretary, economic affairs to India Today.

So now 13 public sector banks including SBI, PNB, Dena Bank, Corporation Bank and will have access to  a whopping Rs 22,915 cr.

Interestingly, country's biggest bank the State Bank of India which reported sharpest fall in quarterly profits in 5 years in March due to bad loans gets the largest share of recapitalisation fund at Rs 7575 cr. SBI has been under scanner for not being able to recover nearly 9000 cr loans given by 17 banks consortium to now defunct Kingfisher airlines.

"It was imperative that the recapitalisation fund was given out as lot of weaker banks needed capital for growth urgently. Their risk profile of these banks makes it difficult for them to raise money from elsewhere", said Abheek Barua, Chief economist, HDFC bank

Although the first tranche of Rs 25,000 cr budgetary allocation is a silver lining for the banks, but many like Bank of Maharashtra, Vijaya Bank, Andhra Bank and others have failed to make the cut as well.

"Only banks that have met the required conditions to reduce cost of operations and set targeted growth of deposit and credit goals were given the stimulus", said a finance ministry official

But the real question is if this financial shot in the arm is enough for 13 public sector banks?

"There needs to be two pronged approach with infusion of capital, you need bad loans off the book through asset recovery path", said Abheek Barua, Chief economist, HDFC bank.