R15,000-crore fund infusion plan for PSBs to be finalised this week

Dec 04 2012, 03:08 IST
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SummaryThe government on Monday said it will announce this week details of its plan to infuse Rs 15,000 crore into public sector banks to help them strengthen their capital base and boost lending capacity.

The government on Monday said it will announce this week details of its plan to infuse Rs 15,000 crore into public sector banks to help them strengthen their capital base and boost lending capacity.

“This week, we will have the numbers out about the allocation (of capital to various banks),” financial services secretary DK Mittal told reporters. He said major banks that require capital included Indian Overseas Bank, Central Bank of India and Dena Bank. Bank of Maharashtra and SBI will get additional capital.

Mittal said rights issues were also being considered for recapitalisation of banks, adding, however, that it was a call that each bank had to make. Asked if the finance ministry was in favour of rights issue for all banks, he said it had to be initially cleared by the respective boards of the banks and “when they approach us, we will take a decision.”

On whether LIC will be asked to subscribe to the rights issue, he said: “If there is a rights issue, there is scope for anybody to go in. LIC is not a short-term investor. Maybe, LIC will also make money by selling some of the equities when they come to the market.”

All banks, barring Dena Bank, have Tier-I capital of over 8% — which is well above the Basel norms. However, the finance ministry will infuse additional capital to ensure that credit expansion takes place. On the proposed holding company structure for recapitalisation of public sector banks, Mittal said the finance ministry is analysing the feedback given by the RBI.

“RBI has broadly agreed on this (holding company). However, there is a need to look at the regulatory platform because it would be such a large conglomerate (holding company) and how to be regulated and what kind of capital adequacy it should have,” he said, adding that the concept will help in leveraging resources for PSBs.

Mittal said the government was yet to take a final view on the topic, adding, however, that if the proposal was cleared, there would be only one such holding company. The setting up of a financial holding company to help the PSBs raise resources to meet their capital needs was proposed in the Union Budget 2012-13.

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