Govt to infuse Rs 16,500 cr in PSU banks

The government today said it would provide Rs 16,500 crore financial assistance, over and above Rs 1,200 crore being infused now, to the public sector banks for augmenting their capital.

"An additional sum of Rs 1,200 crore is being infused now. For the year 2010-11, it is proposed to provide a sum of Rs 16,500 crore to ensure that the public sector banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011," Finance Minister Pranab Mukherjee said while presenting Budget.

The government infused Rs 1,900 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, he said.

Besides, the Finance Minister proposed to provide capital support to Regional Rural Banks (RRBs) to enhance their capacity to lend.

"RRBs which were last capitlised 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 said.

The capital assistance to public sector banks is expected to increase the government holding in the some state-run banks depending on the instrument through which the funds are raised.