Public sector Vijaya Bank expects a Rs. 700-crore capital infusion to enhance risk capital and lending capacity.
“We expect Rs. 700 crore from the Government by the end of December,” said Vijaya Bank Chairman and Managing Director, Albert Tauro.
The financial assistance is expected to come in the form of Perpetual Non-Cumulative Preference Share (PNCPS), Mr. Tauro said.
The capital infusion would help the bank in improving Capital to Risk Weighted Assets Ratio (CRAR), he said.
The CRAR of the bank stands at 13.15 per cent, he added.
Last fiscal, the bank had got Rs. 500 crore from the Government to shore up the CRAR.
Three other public sector lenders UCO Bank, Central Bank of India and United Bank of India also received capital assistance from the Government.
UCO Bank got Rs. 450 crore while the Central Bank of India got Rs. 700 crore.
Last month, the World Bank committed to provide $2 billion Banking Sector Support Loan to the Indian government to help select public sector banks expand credit for infrastructure development, small and medium enterprises, and the rural economy.
The World Bank fund would be utilised to shore up their capital against various risks to ensure credit flow to productive sectors.
The capital infusion would come with the objective to enable banks to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent to ensure credit growth continues to sustain economic growth.
Preferring to call it “injection of capital” instead of “recapitalisation” as the latter could mean banks are short of capital, World Bank Country Director for India Roberto Zagha had said liquidity is not an issue with the banks as the Indian banking sector has done “remarkably well”.