The government on Wednesday said it will take a decision to infuse around Rs. 16,500 crore capital in the public sector banks by the end of next month.
The government is expected to take view on public sector banks’ recapitalisation by April-end, Financial Services Secretary R. Gopalan said on the sidelines of an event organised by FICCI.
“We are looking at what is the credit flow (of various public sector banks) at the end of March...after that we will look at Capital to Risk (Weighted) Assets Ratio (CRAR) then Tier1 (capital). Although, number would flow at the result of what is the traded outstanding as on March 31, 2010,” he said.
Last month, the government announced to give financial assistance of Rs. 16,500 crore to the 16 State-owned banks for shoring up their capital base.
While presenting the Budget, Finance Minister Pranab Mukherjee had said, “An additional sum of Rs. 1,200 crore is being infused now. 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.”
The government infused Rs. 1,900 crore in 2008-09 as tier-I capital in four public sector banks to maintain a comfortable level of capital to risk weighted asset ratio, Mukherjee had said.
Besides, the FM proposed to provide financial support to the regional rural banks to enhance their lending capacity.
“The regional rural banks which were last capitalised in 2006-07 are proposed to be further strengthened by providing additional capital so that they have adequate capital base to support increased lending to the rural economy,” he had said.
The capital assistance to public sector banks is expected to increase the government holding in some of them, based on the fund raising method.
Last year, the executive board of the World Bank approved USD 2 billion loan to enhance public sector banks’ capital.