New Delhi, March 3 (KNN) The Government had announced an infusion Rs 6,990 crore in nine better performing public sector banks among the total 27, in the budget 2015-16. This will provide the much needed capital infusion to the Banks to make them compliant to strict Base III norms. In easier words this will enable the recipient Banks to garner more funds, take more risks and expand loan portfolios.
 
Needless to say, the reverse will happen to the 18 PSU Banks non recipient of the largesse, who will have no other way but to tighten belts and liquidate non-performing assets – the easiest target is MSMEs under distress.
 
Expert opinions are varying on the issues of selective treatment of PSU Banks. Welcoming the government's move to selectively allocate capital to lenders, one Reserve Bank deputy governor opined that PSBs will have to look at alternatives beyond the Centre's support for raising money going forward. He has also welcomed the government move to selectively allot capital to only a few of the 27 lenders, saying this will improve the efficiency
 
In contrast another RBI Deputy Governor opined that the selective allocation may "aggravate" the situation for the Banks who are left out. "To my mind, at this point of time, to restrict allocation only to a few banks and to leave the other bank out...Time may not be very appropriate”, he opined. To deprive the Banks of capital would only aggravate the problem and would also have implication on growth... Few challenges which they face at this point of time can be managed if they are able to maintain a growth momentum in coming point of time, he said.
 
Only time will tell who is correct but one thing is sure, this will start merger of PSU Banks into large behemoths with their attendant benefits and risks. (KNN/DB)