The government may delay Rs 14,000 crore fund infusion in the public sector banks in view of volatile market conditions.
New Delhi: The government may delay Rs 14,000 crore fund infusion in the public sector banks in view of volatile market conditions.
As per the plan, the government wanted to infuse funds by the end of September but it may wait for market to stabilise.
Capital infusion may now not happen in September because of stock market volatility. It is advisable to invest when market stabilises, sources said.
Once the stock prices reaches a stable level, the likely chances of losing substantial amount of money is lower, sources said.
The Finance Ministry will finalise the bank-wise fund allocation by the end of this month. However, disbursement may not happen in September.
With fall in share prices of banks, the government will get more number of shares. Consequent to this, government holding will be more than what was envisaged.
Capital will be injected by issue of preferential shares. Since fresh shares are issued, the shareholding of the government goes up.
The BSE banking index comprising of 13 stocks of various public and private sector banks rose marginally by 0.75 percent to close at 10,511.30 points.
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 envisages 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.