Govt clears Rs 6,211 cr for 5 govt banks

This will help banks attain a Tier-I capital of 8% by March 31, 2011

The government today approved infusion of Rs 6,211 crore in five public sector banks — Bank of Maharashtra, Central Bank, UCO Bank, IDBI Bank and Union Bank. The Union Budget had announced infusion of Rs 16,500 crore in public sector banks to increase their capital.

The government will infuse Rs 590 crore, Rs 375 crore and Rs 111 crore in Bank of Maharashtra, UCO Bank and Union Bank of India, respectively, through the perpetual non-cumulative preference shares route. It will infuse Rs 2,016 crore in Central Bank of India by participating in its rights issue and Rs 3,119 crore in IDBI Bank through preferential placement of equity.

“These banks will be able to leverage this capital and lend an additional Rs 77,637 crore to productive sectors of the economy, giving a push to all-round economic activity, besides paying additional dividends and tax revenues to the government,” the finance ministry said in a press release.

The support will help banks attain a minimum Tier-I capital of eight per cent by March 31, 2011. The government has already infused Rs 1,500 crore in four public sector banks in the current financial year. It had provided recapitalisation support of Rs 1,200 crore to three banks in March 2010.

With the latest move, the total infusion in the last four months has reached Rs 8,911 crore, the highest in recent times.

In 2008-09, the Cabinet had approved a proposal to infuse Rs 1,900 crore in four banks by subscribing to their innovative Tier-I capital instruments. While Central Bank of India got Rs 700 crore, UCO Bank, Vijaya Bank and United Bank of India got Rs 450 crore, Rs 500 crore and Rs 250 crore, respectively.
 

WHO GETS WHAT
Bank of Maharashtra	590
UCO Bank	375
Union Bank of India	111
Central Bank of India	2,016
IDBI Bank	3,119
	(Rs crore)

Today’s statement said the government had stipulated certain conditions as part of this infusion and would closely watch these banks so that they continued to maintain the desired capital. The banks will undertake the necessary regulatory formalities to get clearances from the agencies concerned.

Of Rs 16,500 crore, Rs 14,500 crore is coming from World Bank in two loans, while the government is providing the remaining Rs 2,000 crore from its own resources.