The capital assistance to public sector banks is expected to increase the government holding in some of them, based on the fund-raising method
The Indian government on Wednesday said that it will take a decision to infuse around Rs16,500 crore capital in state-run or public sector banks (PSBs) by the end of next month, reports PTI.
The government is expected to take a view on public sector banks' recapitalisation by April-end, financial services secretary R Gopalan said on the sidelines of an event organised by FICCI.
"We are looking at the credit flow (of various public sector banks) at the end of March. After that, we will look at Capital to Risk (Weighted) Assets Ratio (CRAR) and then Tier I (capital)," he said.
Last month, the government announced that it would give financial assistance of Rs16,500 crore to the 16 state-owned banks for shoring up their capital base.
While presenting the Budget, finance minister Pranab Mukherjee had said, "An additional sum of Rs1,200 crore is being infused now. For the year 2010-11, it is proposed to provide a sum of Rs16,500 crore to ensure that the public sector banks are able to attain a minimum 8% Tier I capital by 31 March 2011."
The government infused Rs1,900 crore in 2008-09 as Tier I capital in four public sector banks to maintain a comfortable level of capital to risk weighted asset ratio, Mr Mukherjee had said.
Besides, the finance minister proposed to provide financial support to regional rural banks to enhance their lending capacity.
"The regional rural banks which were last capitalised in 2006-07 are proposed to be further strengthened by providing additional capital so that they have adequate capital base to support increased lending to the rural economy," he had said.
The capital assistance to public sector banks is expected to increase the government holding in some of them, based on the fund raising method.
Last year, the executive board of the World Bank approved a $2-billion loan to enhance public sector banks' capital.