The government today approved Rs 15,000 crore capital infusion in public sector banks (PSBs) in the current fiscal, a move that will increase the lending capacity of the banks by Rs 1.85 lakh crore.

For the year 2010-11, a sum of Rs 15,000 crore is to be infused in Tier I Capital Instruments of the PSBs, said an official release after the meeting of the Cabinet, chaired by Prime Minister Manmohan Singh.

The exact amount, the mode of capitalisation and other terms would be decided in consultation with the banks at the time of the infusion, it said.

For the year 2011-12, it said, additional capital requirements, if any, will be worked out in consultation with the PSBs based on their third quarter results for the year 2010-11.

The statement further said that infusion of Rs 15,000 crore in Tier I Capital Instruments of PSBs would enable them to expand their credit growth by about Rs 1,85,000 crore, it said.

This additional availability of credit is likely to benefit employment oriented sectors, especially agriculture, micro and small enterprises and entrepreneurs that in turn would contribute substantially to the growth of the economy, it said.

The capital infusion would enhance the lending capacity of PSBs that are expected to continue meeting credit requirements of the economy in order to maintain and accelerate economic growth.

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