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PSU banks to get Rs 15,000 cr capital shot post-winter session

Last Updated: Sunday, October 11, 2009 - 13:51

New Delhi: About 10 public sector banks are expected to get over Rs 15,000 crore from the government after Parliament`s Winter Session as part of the recapitalisation exercises, which would shore up their capital against risks to over 12 percent.

As per the initial estimates, public sector banks would
require about Rs 15,000 crore for raising capital adequacy
ratio to over 12 percent and enhance credit disbursal towards
productive sectors at a time when loan growth is slowing down
in the economy, official sources said.

About Rs 10,000 crore would come from the World Bank, and
the remaining would be contributed by the Reserve Bank,
sources said.

The fund would be released after the Parliamentary nod
as it is part of supplementary demand for grants to be tabled
in the Winter Session, sources added.

The winter session of Parliament is expected to start
from some time next month.

As it is, Rs 2,700 crore, sources said, have been
proposed in the 2009-10 Budget for recapitalisation of the
four public sector banks.

Of this, Rs 2,150 crore would be given for the
recapitalisation package for three public sector banks -- UCO
Bank, Central Bank of India and Vijaya Bank.

UCO Bank is expected to get Rs 750 crore, while Central
Bank of India and Vijaya Bank will receive Rs 700 crore each.

The amount would form a part of Tier I Capital and the
infusion would increase the government holding in the three
state-run banks depending on the instrument through which the
funds are raised.

Last month, the executive board of the World Bank
approved USD 2 billion loan to enhance banks` capital.

The World Bank`s USD 2 billion Banking Sector Support
Loan, with 30 year maturity, would help select public sector
banks expand credit for infrastructure development, small and
medium enterprises, and the rural economy.

Preferring to call it "injection of capital" instead of
"recapitalisation" as the latter could mean banks are short
of capital, World Bank Country Director for India Roberto
Zagha had said liquidity is not an issue with the banks as the
Indian banking sector has done "remarkably well".

Dena Bank has requested the government for capital
infusion of Rs 500 crore while Punjab & Sind Bank has asked
for Rs 700 crore during the current fiscal.

At the same time, UBI has approached the Centre for a
capital infusion of Rs 1,800 crore to fuel its expansion

Bureau Report

First Published: Sunday, October 11, 2009 - 13:51
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