The Union Cabinet on10 January 2013 approved a proposal of infusing 12517 crores rupees in public sector banks so that bank could enhance the lending activity and meet the capital adequacy norms.
As per the Finance Minister P Chidambaram about 9-10 public sector banks are going to be benefitted from the capital infusion programme. Also, the name of the banks, the amount for each bank and terms of the conditions will be decided in consultation with them at the time of infusion.
The government is supposed to Provide capital funds to PSBs during the year 2012-13 to the tune of 12517 crore to maintain their Tier-l CRAR (capital to risk-weighted assets ratio) at comfortable level.
The need for that is to make the PSU remain obedient with the stricter capital adequacy norms under BASEL-III as well as to support internationally active PSBs for their national and international banking operations undertaken through their subsidiaries and associates.
In principle approval of the Cabinet is accorded for need based additional capital infusion in PSBs from the year 2013-14 to 2018-19 for ensuring compliance to Capital Adequacy norms under Basel- III.
Benefits of the Capital Infusion in Banks
• The capital investment will ensure fulfillment to the regulatory norms on capital adequacy and will cater to the credit needs of productive sectors of the economy as well as to withstand the impact of stress in the economy.
• It will support national and international banking operations of PSBs and will boost the confidence of investors and market sentiments.
• The infusion of. 12517 crore rupees in the equity capital of PSBs would enable them to expand their credit growth.
• This additional availability of credit will cater to the credit needs of our economy and will also benefit employment oriented sectors, especially agriculture, micro and small enterprises, export, entrepreneurs etc. in promotion of their economic activities which would, in turn, contribute substantially to the growth of the economy.
The Government is committed in making all the PSBs financially sound and healthy so as to ensure that the growing credit needs of our economy are adequately met. To meet the credit requirement of the economy, banks would require capital funds commensurate to the increase in their Risk Weighted Assets (RWAs).
The government earlier had infused about 20117 crore rupees in public sector banks during 2010-11, and 12000 crore rupees in 2011-12.