BackFinance ministry to finalize capital raising plan for PSU banks next month
Ministry to seek blanket permission from cabinet to raise funds by all banks over four-year period
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New Delhi: The finance ministry is likely to finalize by next month the roadmap for ₹ 2.40 trillion capital raising plan of public sector banks to meet global capital adequacy requirements.
The ministry has received the report from SBI Cap on the requirement of various public sector banks. The capital raising plan will be finalized by next month and subsequently the ministry will approach the cabinet for the approval, sources said.
The ministry will seek a blanket permission from the cabinet for raising of funds by all banks over a period of four years, the sources added. The capital would be raised through various instruments and at different times depending on the best valuation, they said. It will be done through a combination of follow on public offer (FPO) and qualified institutional placement (QIP). Besides, banks could raise through bonds and selling assets.
The budget has set aside ₹ 11,200 crore towards recapitalization of PSU banks for the current fiscal.
Last month, the Department of Financial Services had asked SBI Cap to prepare a roadmap for capital raising by public sector banks to meet Basel-III requirement by March 2019. The report was submitted recently to the ministry and a meeting of heads of banks was held after that, sources said, adding that another meeting will be held next month before the finalization of the roadmap.
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 ₹ 2,40,000 crore 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. “Thus, while the government will continue to have majority shareholding, the citizens of India will also get direct shareholding in these banks, which currently they hold indirectly," he had said.
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