A top Finance Ministry official on Saturday categorically ruled out accessing World Bank funds to recapitalise state-run banks, saying enough money has been already budgeted for this purpose.
“Absolutely not,” was Financial Services Secretary Rajiv Takru’s terse response when reporters asked him whether the government will seek a World Bank loan to infuse capital into the 26 public sector banks (PSBs).
“We have already given the banks Rs. 14,000 crore and will give more. We don’t want any money from the World Bank to give to the banks as we have made enough provisions in the budget for this,” he reporters on the margins of a Ficci event here.
Earlier this week, the Finance Ministry had announced a Rs. 14,000-crore capital infusion for banks. It had also said under a special scheme approved by the Ministry, PSBs were asked to lend at lower rates to a slew of consumer products.
Under the capital infusion programme, SBI will get Rs. 2,000 crore, while IDBI Bank and Central Bank of India will get Rs. 1,800 crore each.
All PSBs, except the Chennai-based Indian Bank — which does not need fresh equity capital this year — will be getting funds ranging between Rs 100 crore and Rs 2,000 crore.
It can be noted that the Government uses the National Investment Fund to recapitalise its banks.
Besides the capital support, Takru said PSBs have the headroom to raise Rs. 10,000 crore from the markets though rights issue, qualified institutional placements or follow-on public offer without diluting the Government stake.
Takru said the Rs 14,000-crore infusion is only aimed at enhancing the equity capital and not for any other purpose.
“For the moment this is good enough to see them through.”
In the last few years, Government had sought $ 4.2 billion loan from the World Bank to recapitalise its banks.
While in FY09, it had sought $ 3.2 billion and the World Bank had approved $ 2 billion, in FY11 it asked for another $ 1 billion from the multi-lateral agency. However, on both occasions, the loan was not availed of.