The Reserve Bank of India (RBI) on Saturday said dilution of government holding in public sector banks (PSBs) might not be sufficient for meeting Basel III capital adequacy norms.
“It has been reported recently that the government is contemplating scaling down their holdings in PSBs to 52%. This might not be sufficient to fully meet the capital needs of the PSBs under Basel III norms, as the projections are based on minimum requirements,” deputy governor R Gandhi said at an event in Kolkata.
He said the PSBs would have to chart out a clear capital raising plan over the next five years. “They should actively consider several options, including non-voting rights share capital, differential voting rights capital and golden voting rights share capital,” he said. He said banks could also go for long-term bonds flotation for meeting tier II capital requirements.
Regarding NPA levels of banks, he said: “Consistently we are trying to bring in new methodologies to deal with wilful defaulters.” He, however, said banks would have to devise a robust risk management system to avoid such problems.
Regarding merger of banks, he said these should be considered solely by them on various factors and not be imposed by others, like the government. He added that NBFCs have a higher risk appetite than banks and could apply for small finance banks licence from the regulator.