Govt to infuse Rs 15,000 cr in PSU banks in 2010-11

Source:BS Reporters / New Delhi April 24, 2010, 1:03 IST The Union Cabinet today approved Rs 15,000-crore capital infusion in public sector banks (PSBs) in the current financial year (2010-11). The initiative will increase the lending capacity of the PSBs by Rs 1.85 lakh crore. The move is also likely to help the banks maintain a minimum of eight per cent Tier-I capital to meet the credit requirement of the economy. The amount of Rs 15,000 crore is to be infused in Tier- I Capital instruments of the PSBs. The exact amount, mode of capitalisation and other terms and conditions would be decided in consultation with the banks at the time of infusion.  For 2011-12, additional capital requirements, if any, will be worked out in consultation with the PSBs, based on their results in the third quarter of 2010-11. Capital infusion will also help the banks, which are close to the requirement of a minimum 51 per cent government ownership and do not have the option to raise funds from the capital markets. Injecting more capital would increase government holding in such banks, thereby providing them more headroom to raise capital by diluting stake in the future. Oriental Bank of Commerce, Dena Bank, Andhra Bank, Bank of Baroda, IDBI Bank and Vijaya Bank have less than 55 per cent government equity.