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Govt to inject Rs 17,000 crore into public sector banks this fiscal

06 Jan 2012 Evaluate

In order to recapitalize public sector banks, the Ministry of Finance is aiming at infusing capital worth Rs 17,000 crore into PSU banks in the ongoing fiscal year ending March 2012. The move will help state owned banks in meeting their capital requirements and enhancing lending operations. In the previous fiscal year 2010-11, the government had infused capital to the tune of Rs 20,157 crore into public sector banks.

Over and above the Budget provision of Rs 6,000 crore, the ministry is likely to seek additional Rs 12,000 crore through supplementary demands in Parliament for capital infusion in PSU banks during the current fiscal. The capital infusion initiative of the government, which had already committed to providing adequate capital to public sector banks so as to maintain their Tier-I capital at 8%, is likely to prove beneficial for nation’s major lenders including State Bank of India, Bank of Baroda, Union Bank of India, IDBI Bank, and Syndicate Bank.

The public sector banks are required to maintain high level of financial and functional efficiency as the finance ministry has made it clear that capital support from the government in future would be linked to their efficiency. Meanwhile, Financial Services Secretary DK Mittal had earlier opined that capital of about Rs 3.5 lakh crore will be infused into the state-run banks by 2021. A committee headed by Finance Secretary RS Gujral is busy carving out a strategy for capitalization of public sector banks over a period of next 10 years.

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