Govt looking at next round of capital infusion in PSBs

The Finance Ministry is now looking at the next tranche of capital infusion in certain public sector banks (PSBs) in a bid to strengthen them and make them market ready for raising more resources when budgetary support dries up.

The beneficiaries of the next tranche of capital infusion will be those banks where the Government shareholding is around 51 per cent, Mr R. Gopalan, Secretary, Department of Financial Services, told reporters on the sidelines of an event, organised by Oriental Bank of commerce (OBC) here on Wednesday.

He also said that the Government was conscious of the additional tier-I capital requirement prescribed under Basel-3 and would factor this while deciding on the quantum of capital support.

5 banks

At least five public sector banks – Andhra Bank, Bank of Baroda, OBC, Dena Bank and Union Bank are likely to get capital support from the Government in this tranche as the Government stake in these banks are between 51-55 per cent.

With the UPA Government committed to maintain minimum 51 per cent stake in public sector banks, those banks with the Government holding close to 51 per cent are constrained from approaching the market for fresh mop-up of capital without Centre's matching support.

Mr Gopalan said that the next capital infusion exercise will depend on the availability of resources.

“Let Government fix the availability of resources for this exercise. Once that is done, how to distribute that will be decided. It is not that every bank will be supported. Consistent with the availability of funds, some banks will be supported”, he said.

The earlier round of Government's capital infusion in PSBs happened in June. An aggregate amount of Rs 6,121 crore was committed for five PSBs as part of efforts to shore up their Tier-1 capital to a minimum of eight per cent.
The five banks were Bank of Maharashtra (Rs 590 crore), Central Bank of India (Rs 2,016 crore), IDBI Bank (Rs 3,119 crore), UCO Bank (Rs 375 crore) and Union Bank (Rs 111 crore)

This commitment of Rs 6,121 crore was part of the 2010-11 budget promised capital infusion of Rs 16,500 crore to ensure that PSBs attain a minimum eight per cent Tier-I capital by March 2011.

The Government had infused Rs 1,500 crore in four PSBs in May 2010. Before that, an amount of Rs 1,200 crore had been infused in three PSBs in March 2010.

Source: Buisiness Line