PSU banks to get Rs 15,000 cr capital shot

As per the initial estimates, public sector banks would require about Rs 15,000 crore for raising capital adequacy ratio to over 12 per cent and enhance credit disbursal towards productive sectors at a time when loan growth is slowing down in the economy, official sources said.

About Rs 10,000 crore would come from the World Bank, and the remaining would be contributed by the Reserve Bank, sources said.

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, sources added.
The winter session of parliament is expected to start from some time next month.
As it is, Rs 2,700 crore, sources 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.

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.

The World Bank’s $2 billion Banking Sector Support Loan, with 30 year maturity, would help select public sector banks expand credit for infrastructure development, small and medium enterprises, and the rural economy.

Preferring to call it “injection of capital”, World Bank Country Director for India Roberto Zagha had said liquidity is not an issue with the banks as the Indian banking sector has done “remarkably well”.

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