Rs 3,800-cr fresh capital for 3 PSBs

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New Delhi: The Cabinet on Wednesday approved capital infusion of Rs 3,800 crore into Central Bank of India, UCO Bank and Vijaya Bank by March-end 2010. The infusion of fresh capital would raise the capital adequacy ratio of these banks to at least 12%. It would help banks improve lending and support loans to the tune of 80 times of the extra capital.

Shares of the these three banks jumped by as much as 7% in the intra-day trades at the Bombay Stock Exchange on Wednesday, before settling the day with gains of nearly 3%. Central Bank of India would receive Rs 1,400 crore of capital, while UCO Bank and Vijaya Bank would get Rs 1,200 each. The government last year decided to re-capitalise seven public sector banks after a series of bank failures in the US beginning with the collapse of Lehman Brothers in mid-September 2008.

“Today accessing the capital market is not a viable option. Capital is required. Therefore, we decided to infuse capital,” home minister P Chidambaram said while briefing about the Cabinet decisions on Wednesday. “This will help banks raise capital adequacy to over 12%, much above the Basel II norms of 9%,” he said. At the end of year 2008, the capital adequacy ratio of Central Bank of India was 10.02%, Vijaya Bank at 11.4% and UCO Bank at 11.6%. “The capital infusion would raise our capital adequacy to 12.4%, way over the international norm. It would also help in increasing the lending as Rs 100 crore of capital supports Rs 8,000 of loans, depending on the kind of lending we do,” said UCO Bank CMD S K Goel.