Government is planning for recapitalisation for the PSU banks.

Basel III norms have been deferred by around four years. But the Reserve Bank of India (RBI) may not wait until then to ensure compliance amongst Indian banks. Keeping this in mind, the government is already planning capital infusion for the PSU banks. It is after all aware of the NPA provisioning hit that the banks may have to endure in FY14 as well. Ten public sector banks will therefore get a total capital infusion of Rs 125 bn in FY13 itself. Besides capital adequacy compliance, the government also wants PSU banks to step up lending. Higher credit disbursal is seen as the lone hope to revive the economy. At the government's behest, the PSUs may also have to lend at lower rates compared to the private sector. While the higher capital infusion does mean more stability for PSU banks. But we are not so sure about the same generating higher return on equity in the longer term.