Govt to give Rs 14,000 cr to PSBs

Banks could raise another Rs 10,000 crore from the market depending on their requirements

The government will infuse capital of Rs 14,000 crore in public sector banks (PSBs) this financial year, including Rs 2,000 crore to the State Bank of India and Rs 1,800 crore each in IDBI Bank and Central Bank of India.

The banks can raise another Rs 10,000 crore from the market, depending on their requirements, the government said on Wednesday.

“We will allocate Rs 14,000 crore. Other than that, bank boards will have the option to raise from the market through a rights issue, follow-on public issue and qualified institutional placement (QIP),” Financial Services Secretary Rajiv Takru told reporters.

Asked whether the government would provide additional capital over and above the Rs 14,000 crore, he said banks had launched special promotion schemes till January and the ministry would wait to see the performance before providing additional liquidity, which might be given in the fourth quarter.

“This money has been given to enhance equity capital, not for any other purpose. For the moment, this is good enough to see them through…But we have made amply clear that they could proportionately tap the outside market and increase their equity,” Takru added.

As the government has 62 per cent stake in SBI, the bank can raise funds from the market up to 38 per cent. It could be Rs 1,500-1,700 crore. The SBI board of directors meets on October 30 and would decide on the QIP route.

During the financial year, Indian Overseas Bank will get Rs 1,200 crore. Others to get the capital are Punjab National Bank (Rs 500 crore), Bank of Baroda (Rs 550 crore), Canara Bank (Rs 500 crore), Allahabad Bank (Rs 400 crore), Dena Bank (Rs 700 crore), Bank of India (Rs 1,000 crore), Corporation Bank (Rs 450 crore), Union Bank of India (Rs 500 crore), United Bank of India (Rs 700 crore) and Oriental Bank of Commerce (Rs 150 crore). Some banks have said they did not need additional capital.      

“The capital infusion by the government in PSBs is done with the twin objective of adequately meeting the credit requirement of the productive sectors of the economy, as well as to maintain the regulatory capital adequacy ratios.

The government, as the majority shareholder, is committed to keeping all PSBs adequately capitalised,” the finance ministry stated.

Infusion of capital by the government is in addition to their internally generated capital, to enable the banks maintain a comfortable level of Tier-I capital.  About Rs 12,500 crore was infused in 13 state-owened banks in 2012-13.