As the non-performing assets (NPAs) of state-run banks rise indicating an ailing economy , the government has decided to infuse about Rs 15,000 crore and an announcement on the same will be made this week.
Top three banks that require capital infusion are Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra. India’s largest public sector lender, State Bank of India is also in the need of capital to shore up their base.
"There will be some announcement about the allocation to various banks," Department of Financial Services Secretary D K Mittal said.
The 2012-13 budget had provided Rs 15,888 crore for capitalisation of state-run banks, regional rural banks and other financial institutions, including NABARD.
Mittal said that all but one, Dena Bank have tier I capital of above 8 per cent well above Basel norms.
NPAs on the rise
The non-performing assets or bad loans in state run banks have gone by 0.98 per cent up till September, 2012, and according to Finance Minister P Chidambaram, the issue could be resolved only when the economy gathered pace.
But, whether the capital infusion would be done through rights issue or any other route is yet to be decided. The boards of the respective banks have the power to decide on the issue before it goes to finance ministry for its view.
Need to be sorted
To a question on holding company structure for public sector banks, the secretary said, some regulatory issues needed to be sorted out before going in for a large conglomeration of banks.
The Reserve Bank of India has broadly agreed to the structure, but there are some reservations also on the issues such as capital adequacy ratio, he said.
The government had infused more than Rs.20,000 crore in 2010-11 and Rs. 12,000 crore in 2011-12 in various state-owned banks to help them maintain a capital adequacy ratio of more than 8 per cent.