The government on Saturday approved infusing Rs 6,211 crore into five public sector banks, a move which will help in lending an additional Rs 77,637 crore to various sectors of the economy.

The banks which will get capital infusion include Union Bank of India, Bank of Maharashtra, IDBI Bank, UCO Bank and Central Bank India.

“The five banks would be able to leverage this capital and lend an additional approximate amount of Rs 77,637 crore to the productive sectors of the economy giving a push to all round economic activity besides paying additional dividends and tax revenues to the government,” an official release said.

According to the release, IDBI Bank will get Rs 3,119 crore, followed by Central Bank of India Rs 2,016 crore, Bank of Maharashtra Rs 590 crore, UCO Bank Rs 375 crore and Union Bank of India Rs 111 crore.

With Saturday’s decision, the government’s total capital support during the current financial year will go up to Rs 8,911 crore, the highest in the recent times, it said.

The capital infusion in IDBI Bank will be through the preferential placement of equity, while in Central Bank of India it will be through participation in rights issue. Three other banks namely, Union Bank of India, Bank of Maharashtra and UCO Bank would get capital by way of perpetual non-cumulative preference shares (PNCPS).

These banks will undertake the necessary regulatory formalities to obtain clearances from concerned agencies for infusion of this capital, it said.

The government has stipulated certain conditions as part of this capital infusion and would be closely watching the performance of these banks so that they continue to maintain the desired capital adequacy and achieve those conditions, it said.

Finance Minister Pranab Mukherjee in the Budget speech this year had said, “For the year 2010-11, it is proposed to provide a sum of Rs 16,500 crore to ensure that the public sector banks are able to attain a minimum 8 per cent tier-I capital by March 31, 2011.”

It may be recalled that the government had infused Rs 1,500 crore in four banks in May, 2010.

Of the total, Vijaya Bank got Rs 700 crore, UCO Bank got Rs 300 crore, Central Bank of India and United Bank of India received Rs 250 crore each.

Earlier, capital infusion to the tune of Rs 1,200 crore was done in three public sector banks in March, 2010.

During 2008-09, four banks namely Central Bank of India, Vijaya Bank, UCO Bank and United Bank of India together got Rs 1,900 crore to augument capital base.


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