The Centre on Saturday approved capital infusion of Rs.6,211 crore in five public sector banks to help them in attaining a minimum 8 per cent Tier-I capital by March 31, 2011, and ensure an additional Rs.77,637 crore in lending capacity to various sectors of the economy.

According to an official statement here, the five banks lined up for infusion of fresh capital are: IDBI Bank, Central Bank of India, Bank of Maharashtra, UCO Bank and Union Bank of 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,” the statement said.

Out of the total Rs.6,211-crore capital, IDBI Bank will receive the lion's share pegged at Rs.3,119 crore through preferential placement of equity while the Central Bank of India will account for Rs.2,016 crore by way of the Centre participating in its rights issue.

Of the balance amount, Bank of Maharashtra will get Rs.590 crore, UCO Bank Rs.375 crore and Union Bank of India Rs.111 crore through issuance of perpetual non-cumulative preference shares (PNCPS) to the Centre.

With this approval, the government's total capital infusion during the last four months works out to Rs.8,911 crore, the highest in public sector banks in recent times, the statement said, while noting that these five banks will now have to undertake the necessary regulatory formalities to obtain clearances from the agencies concerned for infusion of capital. “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.

Budgetary promise

The continuing exercise of capital infusion is a part of the budgetary promise 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 the end of the current fiscal.

Towards this end, the government had provided Rs.1,500 crore in fresh capital to four banks in May this year.

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

Earlier in March, capital infusion worth Rs.1,200 crore was carried out in three state-owned banks.

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