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Moneylife » Economy & Nation » Money & Banking » Government to finalise Rs15,000 crore fund infusion in PSBs this week

Government to finalise Rs15,000 crore fund infusion in PSBs this week

MDT/PTI | 04/12/2012 12:19 PM | 

Top three banks which require capital are Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra

New Delhi: The Union government said it will decide about Rs15,000 crore capital infusion in the public sector banks (PSBs) to shore up their capital base this week, reports PTI.

 

"This week there will be some announcement about the allocation (to various banks)," Department of Financial Services Secretary DK Mittal said.

 

"Allocation of the funding will be decided and rest I think the process still has to go through," he said.

 

Asked if the capital infusion would be done through rights issue, he said it has to be first approved by respective boards and then the Finance Ministry will take a view on that.

 

"If there is rights issue, there is scope for anybody to go in...LIC is not a short-term investor," he said to a query if LIC will be asked to subscribe to the rights issue.

 

"May be LIC will also make money by selling some of the equities when they come to the market," he added.

 

He said the government has made budget provision of Rs15,000 crore for recapitalisation of banks in the current fiscal.

 

The top three banks which require capital are Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra. State Bank of India would also need capital, he said.

 

All but one Dena Bank have tier I capital of above 8% well above Basel norms.

 

Asked about holding company structure, Mittal said the Reserve Bank of India has given its feedback and the Finance Ministry is analysing it.

 

"RBI has broadly agreed on this... However, there is a need to look at regulatory platform because it would be such a large conglomerate (holding company) and how to be regulated.

 

What kind of capital adequacy it should have," he said.

 

"Broadly, they (RBI) said we support this view...the government is yet to take a view on (holding company structure for the public sector banks)," he said.

 

The 2012-13 Union Budget had proposed setting up of a financial holding company that would help raise resources to meet capital needs of state-owned banks. .

 

On the cash subsidy transfer scheme roll out from 1st January, Mittal said banking system is fully ready for the roll out across the identified districts.

 

"Banking system is fully geared up to meet this challenge. We have been working on this the last 10 months and I think banking system has done a great job, including private sector banks also, and we are fully ready," he said.

 

Meanwhile, Central Registry of Securitisation Asset Reconstruction & Security Interest of India (CERSAI) and Credit Information Bureau (India) Ltd (CIBIL) have signed an agreement to share information.

 

"This partnership between the two institutions has been conceived with a view to bringing synergy of information and operations by the lending institutions," he said.

 

This collaborative venture will bring considerable value to the industry and enhance their confidence in lending, he said.

 

The scope and coverage of the central registry will be further expanded to include a host of other activities and information that relate to the financial sector, he added.

 

As many as 296 banks, housing finance companies and financial institutions have so far registered themselves with CERSAI and are filing the details of the mortgages taken by them by deposit of title deeds. It has now a data base of more than 75 lakh records of equitable mortgages.

 

Banks can, before accepting any title deed for mortgage, make a search in the CERSAI record to ensure that there is no existing mortgage or loan against the property, and thus avoid any potential fraud or multiple financing.


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1 Comment
nagesh kini

nagesh kini 2 years ago

When the PSBs are doing well on the stock exchanges as the result of investor confidence, I feel it will better to open the new issue to small and/or domestic institutional share holders to the exclusion of FIIs, this will enable local infusion instead of the Government increasing its equity which it should decrease any way. It can divest some of it through this route too.

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