Finance Minister Pranab Mukherjee may on Monday announce recapitalisation of public sector banks to help them meet the credit demand of productive sectors, especially those hit hard by the global financial meltdown.
He had given an indication to this effect in his address to the heads of public sector banks last month. "As the main shareholder of the public sector banks, the government has already announced that it wants to recapitalise public sector banks to enable them to achieve the CRAR (Capital to risk-weighted Assets Ratio) of 12 per cent," he had said.
He had said that the government will ensure that the credit growth of public sector banks does not suffer for want of capital.
Banks likely to benefit include Bank of Maharashtra and Dena Bank. Infusion will help these banks raise capital adequacy to over 12 per cent, much above the Basel II norm of 9 per cent.
Capital adequacy refers to the ratio of a bank's risk-weighted assets to its equity.
The government has announced capital infusion to the tune of about Rs 2,150 crore. Of this, UCO Bank will get Rs 750 crore, while Central Bank of India and Vijaya Bank will receive Rs 700 crore each.
Besides, the Cabinet has also cleared the proposal for capital restructuring of Kolkata-based United Bank of India. Last fiscal, the government infused Rs 1,650 crore in three public sector lenders, Central Bank of India, UCO Bank and Vijaya Bank.
UCO Bank got Rs 450 crore, Central Bank of India Rs 700 crore and Vijaya Bank Rs 500 crore.
The government will seek additional $3 billion (about Rs 14,440 crore) from the World Bank for public sector banks' recapitalisation.
This is part of $4.2 billion (about Rs 20,160 crore) additional funds that India is seeking over and above the permissible annual grant to the country.
"We have sought additional World Bank funding over and above what is normally admissible every year additional to the extent of $4.2 billion. Of that $3 billion has been sought for the recapitalisation of the banks over the period of about two years," Department of Economic Affairs Secretary Ashok Chawla had said in a post interim-budget conference.
The process is currently in the pipeline and appropriate provision and inclusion would be made in the Budget statement as we go along during the year," he had said.