India's state-run banks are facing rising non-performing assets (NPA) and write-offs because of poor lending decisions.
Finance Minister P. Chidambaram said the combined injection of capital would not exceed the 150 billion rupees provisioned in the budget for the fiscal year ending 2013, which is short of the banks' requirements. ($1 = 54.8550 rupees)
Govt approves Rs 12,517 cr capital infusion in 10 PSU banks
New Delhi, Jan 10 (PTI): Seeking to enhance lending by banks and help them meet capital adequacy norms, government today approved infusion of Rs 12,517 crore in around 10 state- owned banks over the next three months.
The Cabinet has also given in-principle nod for providing need based re-capitalisation of banks till 2018-19 for ensuring compliance with the Basel III capital adequacy norms.
"Pursuant to the Budget announcement made by the Finance Minister on March 16, 2012, we are infusing additional capital into the public sector banks. We will infuse before the end of this fiscal year a sum of Rs 12,517 crore," Finance Minister P Chidambaram said after the Cabinet meeting here.
"We think about 9-10 banks will get the money...this will enable the banks to maintain the Tier I CRAR (capital to risk-weighted assets ratio) at a comfortable level and will be compliant to stricter capital adequacy norms of Basel III whenever Basel III is implemented," he said.
The name of the banks, the amount for each bank and terms of the conditions will be decided in consultation with them at the time of infusion, the minister added.
The government infused about Rs 20,117 crore in public sector banks during 2010-11, and Rs 12,000 crore in 2011-12.
The cabinet also gave in-principle approval for need- based additional capital infusion in PSBs from 2013-14 to 2018 -19 for ensuring compliance with Basel-III -- global banking norms on capital adequacy to minimise financial risk.
It will cater to the credit needs of productive sectors of the economy as well as help withstand the impact of stress in the economy, Chidambaram said.
This will also support national and international banking operations of PSBs and boost the confidence of investors as well as the market sentiment, he added.