Rs 16,500 cr to be infused into 13 banks in 2010-11

Source:BS Reporter / Mumbai March 27, 2010, 0:59 IST
The government has identified 13 public sector banks for capital infusion of Rs 16,500 crore during the next financial year. This is to ensure that public sector banks have Tier-I capital of 8 per cent.

Speaking to reporters after the meeting of the High Level Co-ordination Committee on Financial Markets (HLCC), Finance Secretary Ashok Chawla said: “The banks have been identified. My understanding is 13 banks and the amount is Rs 16,500 crore.”

As on December 31, at least four banks had Tier-I capital of less than 8 per cent. UCO Bank’s Tier-I capital was 6.5 per cent, IDBI Bank’s Tier-I capital was 6.6 per cent, Bank of Maharshtra ’s Tier-I capital was below 8 per cent and for Central Bank of India it was 7.14 per cent.

Tier-I capital of some of the other banks is expected to fall below 8 per cent by the end of March with the loan growth picking up in the fourth quarter. It was muted for the first nine months of 2009-10.

According to the Reserve Bank of India (RBI) norms, banks have to maintain a minimum capital adequacy ratio of 9 per cent, with Tier I capital of at least 6 per cent.

The country’s largest lender, State Bank of India (SBI), which is also aiming for a rights issue to raise Rs 10,000-20,000 crore, did not apply for capital infusion, said R Gopalan, secretary, department of financial services.

The committee reviewed the developments in the financial market and deliberated on several issues related to the development of the corporate debt market, the budget announcement on setting up of the Financial Stability and Development Council (FSDC) and the Financial Sector Legislative Reforms Commission and the report of the Committee on Investor Awareness and Protection.

While answering a question on having a super-regulator, Chawla said, “We are still discussing the broad contours of what the body (FSDC) will do and what will be the composition. It has not yet been finalised.”

The meeting was also attended by RBI Governor D Subbarao, Chief Economic Advisor, Ministry of Finance, Kaushik Basu, Securities and Exchange Board of India Chairman CB Bhave, Insurance Regulatory and Development Authority Chairman J Hari Narayan and Pension Fund Regulatory and Development Authority Chairman GC Chaturvedi.