New Delhi: The Finance Ministry is likely to finalise Rs 14,000-crore capital infusion for public sector banks by the end of this month to meet their global capital requirement norms, Basel III.
"We have received capital requirement proposals from all public sector banks and are evaluating their proposals at the moment. Hopefully, capital allocation to banks would be finalised by August-end," an official source said.
Thereafter, fund allocation will be done to individual banks by issue of preferential shares, sources said, adding rights issue is not a favourable option at the moment as stock prices are very low, sources added.
Government's holding will increase if capital infusion is through preferential allotment of shares. Banks can explore other routes when conditions are conducive and the government will also get better return on its stake dilution, sources said.
Last month, Finance Minister P Chidambaram had said all public sector banks are meeting Basel III requirements for capitalisation, though four of them -- Indian Overseas Bank, IDBI Bank, Bank of Maharashtra and Dena Bank -- have Tier-1 capital below 8 percent.
The government will take steps to ensure that these banks have 8 percent Tier-1 capital by the end of the current fiscal year, Chidambaram had said.
Other lenders like Punjab National Bank have made a request of Rs 1,500 crore capital infusion by the government while Chennai-based Canara Bank has sought Rs 1,000 crore during the current fiscal.
In the Budget speech, Chidambaram had said: "Before the end of March 2013, we should provide Rs 12,517 crore to infuse additional capital into 13 public sector banks. In 2013-14, I propose to provide a further amount of Rs 14,000 crore for capital infusion."
"We should ensure that public sector banks always meet Basel III regulations as they come into force in a phased manner," he had said.
Implementation of Basel III capital regulations envisage enhancing 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.
The government had infused about Rs 20,117 crore in public sector banks during 2010-11, and Rs 12,000 crore in 2011-12.
First Published: Sunday, August 4, 2013, 16:08