Govt asks PSBs to present their capital requirements

The banks will give three rounds of presentations in Delhi, Mumbai and Bengaluru

Extending a lifeline to public sector banks (PSBs), the Union finance ministry on Friday asked them for presentations on their capital requirement.

“Based on the presentation, which would focus on additional fund requirement to meet the Basel-III norms of capital adequacy, the banks could be allocated funds beyond the budgeted amount,” said a source.

The government had allocated Rs 7,000 crore in 2015-16 for capital infusion, termed inadequate by a majority of PSBs. In 2014-15, the ministry had infused a little over Rs 6,000 crore in the state-owned banks.

After attaining a consensus on the fund requirement, the the proposal for increased allocation would go to the cabinet.

The banks will have three rounds of presentations, in Delhi, Mumbai and Bengaluru. The first round of representations from Kolkata-based banks such as UCO Bank and United Bank of India were conducted on Friday. The final round would be on July 3. The aim is to get speedy cabinet approval, to get a supplementary grant before Parliament in the monsoon session.

“We have been suggesting to the finance ministry from time to time that PSBs need more capital than what budget has indicated. We have also been raising this issue at various discussions and forums,” Reserve Bank Deputy Governor S S Mundra said recently.

“The budgeted amount will not be adequate from the perspective of both enabling the bank for a clean-up of the books, which is required, and growth when it comes back, to support it,” he said.

The government had allocated     Rs 6,990 crore to nine PSBs on 2014-15, based on parameters such as return on assets and return on equity.

PSBs had earlier asked the ministry to consider additional parameters to assess performance, such as operating income, level of non-performing assets, ability to manage risk and cost to income ratio.

During the previous quarterly review in March this year, the ministry felt banks should work out their own plan for raising capital from the market. “Banks should have a base line board-validated capital raising strategy,” said the ministry.