Govt to recapitalise 7 PSU Banks: FM

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Agencies: New Delhi, October 22:, Oct 22 2008, 20:05 IST

Finance Minister P Chidambaram on Wednesday said government will inject fresh capital in seven public sector banks to improve their financial health and help them achieve a capital adequacy ratio of over 12 per cent.

"Today I announce with the Prime Minister's permission that banks which have CRAR of below 12 per cent, well above 8 per cent Basel norm, well above 9 per cent RBI stipulated norm... we will help them recapitalise and bring them (CRAR) above 12 per cent," Chidambaram said while replying on a discussion on Supplementary Demands for Grants in Rajya Sabha.

However, Chidmabaram did not mention the names of the PSU banks which will benefit from the recapitalisation programme of the government.

Capital to risk (weighted) Asset Ratio (CRAR) is the capital and assets ratio which banks are required to maintain against risks. The ratio reflects the financial strength of a bank and its ability to take risk and remain solvent in times of credit crunch.

Last week, Finance Minister had said that "nevertheless, the government has decided to provide the banks access to finance in order to raise CRAR that are now between 10-12 per cent to reach 12 per cent by a suitable date in future.

"The details of the capitalisation scheme are being worked out." He pointed out CRARs of Indian banks were well above the Basel norm of 8 per cent and RBI-stipulated norm of 9 per cent.

According to RBI data banks which have low CRAR at the end of March 2008 were UCO Bank (10.09),

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Reader's Comments (2)| Post a Comment

Do political fortunes also need such investments ?

CK Raju, Thrissur | 23-Oct-2008Reply | Forward

One fails to understand how much well-being of the general public are attached to these banks where much of the public money is now redirected to. How does the FM come to a conclusion that by enhancing the reserves of these banks from the funds meant for serving the poor people of this country, the general public would stand to gain more ? One also doubts as to how much public these public institutions are ? Aren't they as private as any other private banks ? Is there any drastic change in their outlook to contradict this ? If these banks are more-of-private, then this move qualifies as a undue charity abusing constitutional power and authority. Why run the risk of being haunted by the next government with such moves that can also be interpreted as one where the motive is linked to the political fortunes of a party/individual in the forthcoming elections ?