18 public sector banks seek capital infusion from govt

“Almost all...18 banks are in the list. However subsidiaries of State Bank of India (SBI) are not entitled,” said a top Finance Ministry official. State-owned banking sector comprises 20 nationalised banks, SBI and its six subsidiaries.

The fresh funds would basically come from the World Bank and the shortfall, if any, would be met by the government, he said, adding the total amount is yet to be worked out.

The World Bank is providing a loan of about Rs 10,000 crore for the injection of capital in the public sector banks. Meanwhile, the Government of India on Tuesday signed loan agreements with the World Bank for around Rs 20,000 crore credit to support the country’s infrastructure projects and also for recapitalising the public sector banks.

The fund would be released after the Parliamentary nod as it is part of supplementary demand for grants to be tabled in the winter session, the official added. The winter session of Parliament is expected to start from some time next month. As it is, Rs 2,700 crore, the official said, have been proposed in the 2009-10 Budget for recapitalisation of the four public sector banks.

Of this, Rs 2,150 crore would be given for the recapitalisation package for three public sector banks — UCO Bank, Central Bank of India and Vijaya Bank. UCO Bank is expected to get Rs 750 crore, while Central Bank of India and Vijaya Bank will receive Rs 700 crore each.

Government holding
The amount would form a part of Tier I Capital and the infusion would increase the government holding in the three state-run banks depending on the instrument through which the funds are raised. Dena Bank has requested the government for capital infusion of Rs 500 crore, while Punjab & Sind Bank has asked for Rs 700 crore during the current fiscal.

At the same time, United Bank of India has approached the Centre for a capital infusion of Rs 1,800 crore to fuel its expansion plans.