Govt ready to infuse Rs 20K cr eq capital annually in PSBs

Moneycontrol Bureau

The Government of India, the major stake holder in public sector banks (PSBs), is ready to provide an equity capital support of upto Rs 20,000 crore per year to meet their Basel III norms, an international standard to maintain good health for banks. Moreover, it does not see any immediate crisis on account of this.

"Basel III norms will really come into effect from 2015. Immediately, there is no crisis. Every year, Rs 15,000 to 20,000 crore (capital injection to banks) can be sustained without any issues. If it goes beyond that, then we have a problem. We will come to the right decision in right time. It is really important for us to take a decision in between 2015-18," Sunil Soni, additional secretary in the department of financial services told reporters on the sidelines of conference here in Mumbai.

Earlier, the Reserve Bank of India estimated that Indian banks would need an additional capital requirement of Rs 5 lakh crore, of which, non-equity capital will be of the order of Rs.3.25 lakh crore while equity capital will be Rs.1.75 lakh crore.

The government has a budgetary allocation of over Rs 14,000 crore to infuse capital in state-owned banks in 2012-13.

"We have asked all banks to do their assessment and get it approved by their respective board and send it to us. So far, we have not yet got the full response. The (allocated) amount will definitely be distributed among the needy banks," said Soni adding that if banks can generate good profits, the capital requirement will be less and it can be ploughed back.