Public sector banks: Govt may infuse Rs 20,000 cr capital

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SummaryIndian government is likely to allocate 200 billion rupees for capital infusion.

The government is likely to infuse additional capital of Rs 20,000 crore in the public sector banks next financial year to meet Basel III global capital risk norms.

As per the capital requirement plan submitted to the Finance Ministry, public sector banks would require about Rs 20,000 crore in 2013-14, official sources said.

"The final amount may be less which will be decided in consultation with the Department of Expenditure under the finance ministry," sources added.

The announcement of capital infusion will be made by Finance Minister P Chidambaram in the Budget on February 28.

Last month, Chidambaram had said capital can only be provided by shareholders.

The government is the majority shareholder in banks and would like to maintain its control and majority shareholding in them, he had said, adding, the government is committed to keep all the state-owned banks financially sound and healthy so as to ensure that the growing credit needs of the economy are adequately met.

Implementation of Basel III capital regulations envisaged to enhance requirement of core equity capital by banks due to higher capital ratios. The Basel III capital ratios will be fully phased in as on March 31, 2018.

Meanwhile, the RBI has extended the implementation date for Basel III by three months to April, 1, 2013.

During the current, the government has approved infusion of Rs 12,517 crore in around 10 state-owned banks.

The government infused about Rs 20,117 crore in public sector banks during 2010-11, and Rs 12,000 crore in 2011-12.

As per the Reserve Bank of India (RBI) estimate, the government will have to pump in additional Rs 90,000 crore to retain its shareholding in the Public Sector Banks (PSBs) at the existing level to meet the the Basel III norms over the next five years.

"... If the Government opts to maintain its shareholding at the current level, the burden of recapitalisation (in PSBs) will be of the order of Rs 900 billion," RBI Governor D Subbarao had said last year.

He had said the government has two options-- either to maintain its shareholding at the current level or bring down its shareholding at 51 per cent.

However, he had said that if the government decides to reduce its shareholding in every bank to a minimum of 51 per cent, the burden reduces to under Rs 70,000 crore.

Indian govt may inject $3.7 bn in 2013/14

(Reuters) Indian government is likely to allocate 200 billion rupees ($3.71 billion) for capital infusion in public sector banks in the next financial year, a finance ministry official with direct knowledge of budget talks told Reuters on Wednesday.

The official refused to be named as the information is a budget secret.

Finance Minister P. Chidambaram will reveal the amount in his budget speech on Feb. 28.

In the current fiscal year ending in March, the government set aside 150 billion rupees to inject capital.

The government will also try to raise 400 billion rupees in the new fiscal year through a partial privatisation of state-run companies, higher than 300 billion rupees it is aiming this year, the official said, adding this had not been finalized.

($1 = 53.9300 Indian rupees)

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