PSBs seek Rs 15k cr as capital infusion

Public sector banks are pushing the government, their majority shareholder, for a record level of capital support to finance their growth.

The economic recession has sharply slowed the offtake of credit to less than 13% from an average 23% last financial year, and also whetted enormous appetite of the banks for more capital from the government.

The list of banks that need funds from the government, earlier confined only to weak banks, has expanded to include a couple of banks among the top five. The top-tier banks that have asked for funds from the government include Punjab National Bank, Bank of Baroda and Bank of India.

According to an FE estimate, these three are among the 10 banks that have lined up fund requirements of over Rs 15,000 crore from the government.

Some of the banks are hit by the higher non-performing assets and the consequent need of resources for higher provisioning, while others are targetting a higher growth rate and hence, need cheaper capital to finance that.

MD Mallaya, chairman & managing director of Bank of Baroda, the fourth largest public sector bank by size of assets, confirmed the development. ?We are yet to get approval from the government,?? he said, while refusing to disclose the amount they had asked the government as tier-I and II capital. However, industry sources point out that the bank may need up to Rs 5,000 crore to finance its expansion plans.

Bank of India has also sought Rs 2,000-crore capital infusion from the government as it second quarter net profit nosedived 57.67% on high provisions. Chairman & managing director Alok Misra said he expects to receive the capital from the government by March-April 2010, which will help it to support the business growth.

Central Bank of India has asked for an infusion of Rs 700 crore from the government to shore up its capital, though it has posted a 227% growth in its quarterly net profit. ?We have got Rs 700 crore from the government. We have sought a further Rs 700 crore infusion?, said bank chief S Sridhar. He said the bank was not planning any follow on public offer in the near future to tap the capital markets for funds. The capital from the government will expedite the creation of several verticals to cover key business areas.

Other banks in the queue include Dena Bank that expects Rs 1,200 crore, Uco bank for Rs 750 crore, Bank of Maharastra for Rs 1,800 crore and Oriental Bank for Rs 1,000 crore. Union Bank has asked for over Rs 1,800 crore from the government.