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Home >Industry >Capital infusion plan for PSU banks soon: G.S. Sandhu
A file photo of banks in New Delhi. The government has infused `58,600 crore between 2011 to 2014 in the state-owned banks. Photo: Mint
A file photo of banks in New Delhi. The government has infused `58,600 crore between 2011 to 2014 in the state-owned banks. Photo: Mint

Capital infusion plan for PSU banks soon: G.S. Sandhu

Indian banks need `2.4 trillion of capital infusion by 2018 to meet the Basel III norms on capital adequacy

New Delhi: Finance ministry will soon come out with the capital infusion plan for public sector undertaking (PSU) banks to help them meet the global capital adequacy norms, financial services secretary G.S. Sandhu said on Tuesday.

“We will very soon bring capital infusion plan in PSU banks to cabinet. It’s almost ready," he said at an event.

Public sector banks require equity capital of 2.4 trillion by 2018 to meet global Basel III norms on capital adequacy. For the current fiscal, the government has allocated 11,200 crore for bank capitalisation.

On whether the government was contemplating bringing down its equity from 58% to 52% in PSU banks, Sandhu said: “If banks have to raise money from market then the stake has to come down then only they can raise money. That is part of our paper."

The government has been considering a proposal under which its equity could come down to 52% from 58% presently as part of recapitalization exercise.

Sandhu said the instrument for share sales in banks will be partly qualified institutional placement (QIP) and partly public.

As per law, government holding at any moment must not come below 51% to maintain the public sector character of PSU banks.

At present, government shareholding in various banks varies between 56.26% (Bank of Baroda) and 88.63% (Central Bank of India).

The government has infused 58,600 crore between 2011 to 2014 in the state-owned banks.

Finance minister Arun Jaitley in the budget speech had said that “to be in line with Basel-III norms there is a requirement to infuse 2.4 trillion as equity by 2018 in our banks. To meet this huge capital requirement we need to raise additional resources to fulfil this obligation".

While preserving the public ownership, the capital of these banks will be raised by increasing the shareholding of the people in a phased manner through the sale of shares largely through retail to common citizens of this country, the minister had said.

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