Cabinet likely to infuse Rs 12k cr in public banks

New Delhi: Government is likely to consider next week the proposal to infuse Rs 12,000 crore into public sector banks, a senior official of the Finance Ministry said.

The ministry has approved investment of Rs 12,000 crore in 12 public sector banks including State Bank of India, Central Bank of India and United Bank of India. The fund would be disbursed before March to these public sector banks.

Country’s largest lender SBI will get Rs 3,004 crore as part of recapitalisation plan to boost the bank’s capital base. Government has been infusing funds in the public sector banks in the last couple of years to strengthen their finances.

It has injected about Rs 32,000 crore so far in the previous two financial years. During 2011-12, public sector banks got Rs 12,000 crore for improving their capital adequacy ratio.

The government pumped in Rs 20,157 crore in public sector banks in 2010-11 to maintain tier I capital at 8 percent and increase government’s equity in some banks to 58 percent.

Besides, the Finance Ministry will also seek Cabinet approval for fund infusion in the public sector banks till March 2018. The Finance Ministry has made assessment of the capital needs of public sector banks for meeting Basel III norms to be complied in a phased manner, ending March 2018.

As per the existing norms, capital infusion beyond Rs 300 crore in a company requires Cabinet approval. In order to strengthen risk management mechanism, the Reserve Bank issued guideline for Basel III last year. The implementation of the capital adequacy guidelines based on the Basel III capital regulations was to begin from January 1, 2013. However, RBI recently deferred it by another three months.

PTI