Finance Minister Pranab Mukherjee on Sunday said the government is committed to provide adequate capital to public sector banks to meet global risk norms.
“I have already stated that we will try to provide adequate capital... Requirements of all banks cannot be done in one year. It will take time,” Mr. Mukherjee said on the sidelines of a function here.
“The guidelines have been approved. As per the Basel III norms, we will provide capital adequacy to all the public sector banks,” he said after inaugurating corporate office of Oriental Bank of Commerce (OBC).
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The draft guidelines on the Basel III capital regulations were released on December 30, for implementation from January 1, 2013 and will be completed in phases by January 1, 2019, Mr. Mukherjee said.
To strengthen risk management mechanism, RBI has issued issued draft guidelines, envisaging that the equity capital of a bank should not be less than 5.5 per cent of risk-weighted loans.
These guidelines envisaged more stringent norms on capital adequacy, Mr. Mukherjee said, adding, “on our part, the government has committed to maintain the minimum 8 per cent Tier I (equity capital) in all public sector banks which is over and above the regulatory requirement of 6 per cent.”
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He said the government had provided capital to state-owned banks last fiscal, and it is taking necessary steps to keep banks adequately capitalise in 2012-13 as well.
In 2010-11, the government provided capital support to the tune of Rs 20,157 crore to public sector banks. They included Bank of Baroda, Union Bank of India, Oriental Bank of Commerce, UCO Bank and Dena Bank.
This fiscal, the government will infuse over Rs 7,900 cr in SBI. It is slated to capitalise more banks by March.
On the government’s financial inclusion programme, the Finance Minister said that banking services to un-banked villages with a population of 1,000 or more will be provided within a couple of years.
“In my Budget speech of 2010—11, I made a commitment on behalf of all banks to cover 73,000 un-banked villages by March 2012...In another couple of years, we propose to cover all habitations having population 1,000 and more such villages,” Mr. Mukherjee said.
On leakage in subsidies, he said, “I lose my sleep not when I look at the volume or quantum of subsidy, but because it is not reaching to the poor and needy and targeted group.”
He added that banks can play a very major role through inclusive programmes like Swabhimaan, and by extending facilities to the large number of rural population.
If these subsidies are provided through the banking network, institutional financial networks, the leakage will be reduced substantially, he said.
The Finance Minister inaugurated 2 Ultra Small Branches in Badarpur and Marora in Haryana as per the recent guidelines of Ministry of Finance where Banks have been advised to open such branches with minimum staff and infrastructure costs.
Business Correspondents, appointed by OBC, will undertake all cash transactions and other routine work through the week.
However, a bank official will visit the branch at least once in a week along with a laptop with proper connectivity.
This will help the bank to widen its reach for Financial Inclusion in remote areas.