Centre approves Rs.1,800 cr each to Central Bank and IDBI Bank and Rs.1,200 cr to IOB

The Finance Ministry, on Wednesday, announced that it would infuse Rs.14,000 crore capital in various banks this fiscal, including Rs.2,000 crore in State Bank of India and Rs.1,800 crore each in IDBI Bank and Central Bank of India.

Apart from the capital support from the government, public sector banks have the headroom to raise Rs.10,000 crore from the market though rights issue, qualified institutional placement (QIP) or follow-on public offer (FPO) without diluting the existing government stake.

Financial Services Secretary Rajiv Takru said the money had been given to enhance equity capital. For the moment, this was good enough to see them through, he added.

The Finance Minister, P. Chidambaram, had, on Tuesday, indicated that the government would be allocating Rs.14,000 crore through budget. “Other than this, bank boards could take decisions on how they want to raise additional equity. They have three options — rights issue, QIP, and FPO. In any case, we have made amply clear that they could proportionately tap the outside market, and increase equity. The banks will be able to generate Rs.10,000 crore,” Mr. Takru added.

Indian Overseas Bank would get Rs.1,200 crore, and Punjab National Bank Rs.500 crore. The second round of capital infusion may come in the fourth quarter of the current fiscal, depending upon banks’ requirements. “We will be giving them more after judging their performance based on concessional lending towards home, auto and consumer durable,” he said.

Mr. Takru said SBI would be raising the funds proportionately. ``The government has 62 per cent stake. So, they can raise funds from the market up to 38 per cent,’’ he said. SBI board is meeting on October 30.

Twin objective

The capital infusion had been done with the twin objective of adequately meeting the credit requirement of the productive sectors as well as to maintain regulatory capital adequacy ratios in public sector banks (PSBs). The government, as the majority shareholder, was committed to keep all PSBs adequately capitalised, a statement issued here said.

Infusion of capital by government in PSBs is in addition to their internally generated capital to enable them maintain a comfortable level of Tier-I capital. Towards this end, the government had been infusing need-based capital in PSBs, the statement said. An amount of Rs.12,517 crore was infused in 13 PSBs during 2012-13.

During the current fiscal, Bank of Baroda will get Rs.550 crore, Canara Bank Rs.500 crore, Allahabad Bank Rs.400 crore, and Dena Bank Rs.700 crore. Besides, Bank of India will get Rs.1,000 crore, Corporation Bank Rs.450 crore, Union Bank of India Rs.500 crore, United Bank of India Rs.700 crore and Oriental Bank of Commerce Rs.150 crore.

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