Govt likely to infuse Rs 9,500 crore in banks in Q1: Banking secy

The government will provide Rs 9,500 crore for recapitalisation of public sector banks in the first quarter next year, while about Rs 7,000 crore will be infused during the rest of the financial year 2010-11.

In the Union Budget last month, the government had proposed to infuse Rs 16,500 crore into public sector banks to help them maintain a comfortable capital adequacy ratio (CAR).

R Gopalan, secretary, Department of Financial Services, told Business Standard that banks which did not have a CAR of 8 per cent or above would get priority. Bank of Maharashtra, Allahabad Bank, Central Bank of India, Dena Bank, Indian Overseas Bank, Syndicate Bank, UCO Bank, Vijaya Bank, Canara Bank and IDBI Bank are likely to benefit from the move.

“We will withdraw the World Bank loan in April or May. We will try to give it to banks as soon as possible after taking the Cabinet approval. Another loan of $1.2 billion will come later,” he said, adding the government had not yet signed an agreement with the global lender for the second loan. The two World Bank loans add to Rs 14,500 crore approximately. The government will provide the remaining Rs 2,000 crore from its own resources.

In 2008-09, the government had infused Rs 1,900 crore as Tier-I capital into four public sector banks to ensure a healthy CAR. It is infusing Rs 1,200 crore in the current financial year.

Gopalan said State Bank of India (SBI) would not require anything from the recapitalisation amount of Rs 16,500 crore. He said the country’s largest lender had not yet approached the government with a formal capital raising plan, but it had various options.