Narendra Modi govt allows 7 PSBs to raise funds from markets

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New Delhi | Updated: March 12, 2015 3:37:00 PM

The move comes soon after the Union Cabinet had, in December last year, allowed PSBs to raise funds from markets by diluting Centre’s holding to 52 per cent.

public sector banks, State Bank Of IndiaLenders such as State Bank of India have already announced plans to tap the markets. SBI had in January said that its panel of directors on capital had allowed it to raise up to Rs 15,000 crore through a share sale.

The Centre on Wednesday allowed seven public sector banks (PSBs) to raise funds from the market in order to meet their capital requirements, citing limited
fiscal space to recapitalise the lenders.

“Approvals have been given in 2014-15 to seven PSBs to raise capital from the market,” said a finance ministry release, though it did not provide further details.

The move comes soon after the Union Cabinet had, in December last year, allowed PSBs to raise funds from markets by diluting Centre’s holding to 52 per cent.

However, lenders such as State Bank of India have already announced plans to tap the markets. SBI had in January said that its panel of directors on capital had allowed it to raise up to Rs 15,000 crore through a share sale.

Explaining the decision, financial services secretary Hasmukh Adhia said, “The government doesn’t have space to give Rs 20,000 crore or 25,000 crore (for capital infusion). If banks require … they have other means to raise capital including raising from market.”

The finance ministry had infused Rs 14,000 crore during 2013-14 in 14 PSBs. In the current fiscal, it had allocated Rs 11,200 crore for capital infusion but disbursed only Rs 6,900 crore to nine public sectors banks. “We don’t have fiscal space and banks are adequately capitalised for the moment. There is no immediate need to raise funds from the market,” Adhia said. For 2015-16, the Budget has proposed infusing just Rs 7,940 crore as capital into banks.

Meanwhile, at a quarterly performance meeting with PSBs, finance minister Arun Jaitley said, “Adoption of differentiated strategies and capital augmentation plans through innovative financial instruments would allow the banks to meet their capital requirements.” PSBs require Rs 2.40 lakh crore by 2018 to meet global Basel III norms.

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