Road map for PSU banks fund-raising by next month

To meet Basel-III norms, public sector banks need Rs 2.4 lakh cr by 2018

The finance ministry on Saturday reiterated that government ownership in public sector banks wouldn't fall below 51 per cent. It said it was likely to prepare a road map for fund-raising by these lenders within a month to help them raise Rs 2.4 lakh crore by 2018, required under Basel-III norms.

While the needs of individual banks are being worked out, all public sector banks need an aggregate of Rs 2.4 lakh crore by 2018. Budget 2014-15 has allocated Rs 11,200 crore for these banks.

Next month, the government will frame a draft Cabinet note on equity dilution in State Bank of India (SBI), the country's largest bank. "We have not yet decided on SBI stake dilution. We are preparing a road map at the moment (for raising capital by public sector banks)," Financial Services Secretary G S Sandhu said at a Canara Bank event here.

Speaking at the same event, Finance Minister Arun Jaitley said, "We have suggested a proposal for recapitalising public sector banks through the next four years...the government is treating this as a very high-priority item."

Jaitley said the banks would raise capital without diluting their public sector nature. "While the government will have majority stake, we will allow the public to invest directly in these banks," he said, adding this would help banks expand and boost the whole process of financial inclusion.

On a query on when the draft Cabinet note on stake dilution by the government would be prepared, Sandhu said "next month, after the Parliament session is over".

The government holds 58.60 per cent stake in SBI. If the stake over and above the 51 per cent mark is offloaded, the Centre could raise Rs 14,533 crore, at the current stock price of Rs 2,561.45 on the BSE.

In January, SBI had raised Rs 8,032 crore by selling 51.3 million shares through a qualified institutional placement. In 2008, it had raised about Rs 16,000 crore through a rights issue.

Sandhu said, "My first priority is the insurance Bill, which is before Parliament." The proposal to raise the cap on foreign direct investment in Insurance has been in Parliament since 2008, when the United Progressive Alliance (UPA) government came up with the Insurance Laws (Amendment) Bill to raise foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent. However, a standing committee on finance recommended retaining the cap at 26 per cent. The UPA government tabled the Bill again, seeking to raise the cap to 49 per cent.

In his reply to a debate on Budget 2014-15 on Friday, Jaitley had said raising the FDI cap to 49 per cent would address the resource crunch in the sector.
INJECTING LIQUIDITY

• To meet Basel-III norms, public sector banks need Rs 2.4 lakh crore by 2018
• Finance ministry to prepare draft Cabinet note on equity dilution in SBI next month
• Govt says its main priority is to take up the insurance Bill, pending in the Rajya Sabha