Finance Minister Arun Jaitley has stated that the recapitalisation to the tune of Rs 2.4 lakh crore in public sector banks to meet Basel III norms is a high priority item for the government. Finance Minister added that the government will make a plan for recapitalising of public sector banks over the next four years and capital would be raised by the banks without diluting the government stake below 51 percent.
Earlier in March 2014, the Reserve Bank of India (RBI) had extended deadline for banks to implement global capital norms, Basel III, by a year to March 2019 amid concerns over the asset quality and profitability of the banks. Indian banks will now align full implementation of Basel III norms closer to the internationally agreed date of January 1, 2019. However, the central bank issued more strict norms for Indian banks as compared to Basel Committee on Banking Supervision (BCBS). Under Basel III, total capital (Tier 1 and Tier 2) of a bank in India must be at least 9 per cent of risk weighted assets (RWAs) while, the BCBS requirement is minimum 8 per cent of RWAs.
However, to be in line with Basel-III norms, there is a requirement to infuse Rs 2,40,000 crore as equity in India’s public sector banks. Finance Minister Arun Jaitley said that the capital of these banks will be raised by increasing the public shareholdings in a phased manner through sale of shares largely via retail to common citizens of this country. Citizens of India will get direct shareholding in these banks, which currently they hold indirectly.