The government would make a capital infusion of over Rs 1,000 crore in three public sector banks including UCO Bank and Central Bank of India this month.
Central Bank of India, UCO Bank and United Bank of India would get Rs 1,200 crore from the government to meet their capital requirement.
This fund infusion will enable these banks to maintain comfortable level of capital to risk-weighted asset ratio (CRAR) for supporting the credit requirement of the productive sectors of the economy.
Of the total, UCO Bank and Central Bank of India would get Rs 450 crore each while United Bank of India, which recently went for an initial public offer, would get financial assistance of Rs 300 crore, according to the supplementary demands of grant tabled in Parliament recently.
Last fiscal (2008-09), the government infused Rs 1,900 crore as Tier-I capital in four public sector banks namely Central Bank of India, UCO Bank, Vijaya Bank and United Bank of India to maintain a comfortable level of capital to Risk Weighted Asset Ratio.
Under the Tier-I provision, banks can raise capital as equity and innovative instruments like perpetual non-cumulative preference shares and perpetual bonds.
During 2010-11, the government would provide Rs 16,500 crore financial assistance to state-owned banks to ensure that they are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011.
The capital assistance to public sector banks is expected to increase the government holding in the some of the state-run banks depending on the instrument through which the funds are raised.
Besides, Finance Minister Pranab Mukherjee has proposed to provide capital support to regional rural banks to enhance their capacity to lend.
"The regional rural banks, which were last capitalised in 2006-07, are proposed to be further strengthened by providing additional capital so that they have adequate capital base to support increased lending to the rural economy," Mukherjee had said in his Budget speech last month.
