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Cabinet likely to consider Rs 12,000 crore capital infusion in PSBs

10 Jan 2013 Evaluate
To boost banks capital base, the government is considering the proposal to infuse Rs 12,000 crore into public sector banks (PSBs) on Dec 10, since it is one of the agendas of the meeting. The Finance Ministry has approved investment of Rs 12,000 crore in 12 public sector banks, including State Bank of India (SBI), Central Bank of India and United Bank of India.Country’s largest lender SBI will get Rs 3,004 crore as part of recapitalisation plan.
 
The fund would be infused before March to these public sector banks. To strengthen banks finances, the government has been infusing funds in the public sector banks in the last couple of years. So far, the government has injected about Rs 32,000 crore in the previous two financial years. In 2011-12 too, public sector banks got Rs 12,000 crore for improving their capital adequacy ratio.
 
In 2010-11, the government pumped in Rs 20,157 crore in public sector banks to maintain tier I capital at 8% and increased government’s equity in some banks to 58%. Further, the finance ministry will also seek Cabinet approval for fund infusion in the public sector banks till March 2018.
 
A formal approval of the Cabinet is required as each of the capital infusion in various public sector banks will exceed the specified investment level of Rs 300 crore. The current rules require a Cabinet approval for any investment exceeding Rs 300 crore in a public sector company. The finance ministry has made assessment of the capital needs of public sector banks for meeting Basel III norms to be complied in a phased manner, ending March 2018.
 
In order to strengthen risk management mechanism, the Reserve Bank issued guideline for Basel III last year. The implementation of the capital adequacy guidelines based on the Basel III capital regulations was to begin from January 1, 2013. However, the central bank recently deferred it by another three months.

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