As many as seven public sector banks (PSBs) might get additional capital from the government shortly, financial services Secretary R Gopalan said.
The banking division had sought the approval of finance minister Pranab Mukherjee in this regard, Gopalan said, adding, “we are seeking the finance minister’s approval... five-seven banks are to be recapitalised shortly”.
The government plans to provide financial support of Rs 15,000 crore to public sector banks during the current financial year. The Cabinet has already approved a capital infusion plan that will increase the lending capacity of state-run banks by Rs 1.85 lakh crore. The exact amount, the mode of capitalisation and other terms, would be decided in consultation with the banks at the time of infusion.
The Rs 15,000-crore fund infusion for Tier-I capital instruments of PSBs would enable them to expand their credit growth by about Rs 1,85,000 crore. This additional credit availability is likely to benefit employment-oriented sectors, especially agriculture, micro and small enterprises and entrepreneurs. Last week, the government infused Rs 1,500 crore into four public sector banks — Vijaya Bank, United Bank of India, UCO Bank and Central Bank of India — as part of their recapitalisation package. Vijaya Bank got Rs 700 crore, UCO Bank got Rs 300 crore, Central Bank of India and United Bank of India received Rs 250 crore each, according to sources.
The letter to this effect was issued by the government on June 2. These banks have been instructed to issue perpetual non-cumulative preference shares (PNCPS) in favour of the President, United Bank of India said in a statement. Accordingly, the bank has issued 25,000 PNCPS of Rs 1 lakh each on June 4 in the name of the President.
The fund infusion will enable these banks to maintain comfortable level of capital to risk-weighted asset ratio for supporting credit requirement of the productive sectors.
