Govt to finalise fund infusion for PSU banks soon
New Delhi: The government Wednesday said it will finalise Rs 15,000-crore capital infusion for public sector banks soon to help them enhance capital base and increase lending capacity.
"We will finalise recap for banks soon," Financial Services Secretary D K Mittal told reporters here.
Rights issue is under consideration for recapitalisation of banks, he said, adding that if government opts for rights issue for banks, it will be done for all banks.
Last week, Finance Minister P Chidambaram had said that most banks would require additional capital and fund allocation to various banks would be decided in the next few weeks.
"We have budgetary provision for infusing additional capital and decision would be taken in the next few weeks about infusing additional capital into banks," Chidambaram had said.
"All but one bank have Tier I capital of above 8 percent well above Basel norms. But if credit expansion has to take place, additional capital has to be infused. So we will infuse additional capital into the banks," he had said.
He had said the government has made Budget provision of Rs 15,000 crore for the current fiscal in this regard and allocation to various banks would be made.
The top three banks which require capital are Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra, he informed.
"We are looking for some capital support from the Government ... We have asked for Rs 1,500 crore from the Government," Indian Overseas Bank Chairman and Managing Director M Narendra said here today.
In 2010-11, the government pumped Rs 20,157 crore in public sector banks to maintain tier I capital at 8 percent and increase the government equity in some banks to 58 percent.
In the following fiscal, public sector banks got Rs 12,000 crore for improving their capital adequacy ratio.
In order to strengthen risk management mechanism, the Reserve Bank issued guideline for Basel III earlier this year.
The implementation of the capital adequacy guidelines based on the Basel III capital regulations will begin from January 1, 2013.
The guideline envisages banks to maintain a minimum total capital (MTC) of 9 percent against 8 percent prescribed by the basel Committee of total risk weighted assets.