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Finance ministry likely to approve capital infusion proposal by mid-November

28 Oct 2011 Evaluate

The ministry of finance indicated that it is likely to approve capital infusion into public sector banks, including State Bank of India by mid-November. In the current financial year, the capital requirement of PSU banks has been estimated between Rs 10,000-20,000 crore.

After the second meeting of the Committee on Capital Requirements of Financial Institutions, the financial services secretary D K Mittal said 'we will hopefully decide on the capital infusion for banks by Tuesday.' Once the committee on capital requirements of financial institutions approves the capital infusion, the proposal will be tabled to Finance Minister Pranab Mukherjee for his approval. This process is expected to finish by November 15. After receiving finance ministry’s approval, the proposal will go to the Union Cabinet.

The first meeting of the committee chaired by the finance secretary R S Gujral was held last week. About 5-6 PSU banks including SBI, Bank of Baroda, Syndicate Bank and Union Bank of India would require capital in the current fiscal year. The capital is either needed to increase the government holding to 58% of tier I capital to 8%.

The committee is examining proposals for capital requirement during the current fiscal as well as for long-term (2021). By that time banks will have to meet Basel II norms as well. As India is set to implement Basel III norms on capital adequacy, in coming ten years, PSU banks would need around Rs 3.5 lakh crore.
 
In 2011-12, the government has already earmarked Rs 6,000 crore for capital infusion in the PSU banks and additional amount would be asked via second batch of the supplementary demand for grants to be tabled in the coming winter session of Parliament. In last financial year, the government had provided capital support of around Rs 20,157 crore to the PSU banks. The banks which got capital from the government last fiscal includes Punjab National Bank, Bank of Baroda, Union Bank of India, Oriental Bank of Commerce and UCO Bank

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