'Govt to infuse capital in PSU banks'

Nov 15 2012, 17:11 IST
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The government today said it will finalise the Rs 15,000 crore capital infusion plan. (Reuters) The government today said it will finalise the Rs 15,000 crore capital infusion plan. (Reuters)
SummaryThe government today said it will finalise the Rs 15,000 crore capital infusion plan.

The government today said it will finalise the Rs 15,000 crore capital infusion plan for public sector banks in the next few weeks to help them enhance their capital base and increase lending capacity.

"Most banks would require additional capital. We have budgetary provision for infusing additional capital and decision would be taken in the next few weeks about infusing additional capital into banks," Finance Minister P Chidambaram said after meeting heads of PSU banks here.

"All but one bank have Tier I capital of above 8 per cent well above Basel norms. But if credit expansion has to take lace, additional capital has to be infused. So we will infuse additional capital into the banks," he said.

He said the government has made Budget provision of Rs 15,000 crore for the current fiscal in this regard and allocation to various banks would be made.

The top three banks which require capital are Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra, he informed.

"But we will have to allocate Rs 15,000 crore which is being done by the (Financial Services) department," he said.

Asked about capital infusion, State Bank of India Chairman Pratip Chaudhuri said, the bank may consider option of rights issue for raising funds to enhance their capital base.

Once the government finalises the capital allocation for public sector banks, SBI would weigh whether it needs to raise capital through rights issue or not, he said.

Indian Overseas Bank Chairman and Managing Director M Narendra said, "We are looking for some capital support from the Government...we have asked for Rs 1,500 crore from the Government."

In 2010-11, the government pumped in Rs 20,157 crore for infusion in public sector banks to maintain tier I capital at 8 per cent and increase the government equity in some banks to 58 per cent.

In the following fiscal, public sector banks got Rs 12,000 crore for improving their capital adequacy ratio.

In order to strengthen risk management mechanism, the Reserve Bank issued guideline for Basel III earlier this year.

The implementation of the capital adequacy guidelines based on the Basel III capital regulations will begin from January 1, 2013.

The guideline envisages banks to maintain a minimum total capital (MTC) of 9 per cent against 8 per cent prescribed by the basel Committee of total risk weighted assets.

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