Govt to infuse additional capital in 5-7 more banks

After having infused Rs 1,500 crore in four public sector banks last week,the government is now planning to infuse additional capital in another 5-7 banks shortly.

After having infused Rs 1,500 crore in four public sector banks last week,the government is now planning to infuse additional capital in another 5-7 banks shortly. The banking division already sought the approval of finance minister Pranab Mukherjee in this regard. We are seeking the finance ministers approval… five-seven banks are to be recapitalised shortly, financial services secretary R Gopalan said today. However,the exact amount and the mode of capitalisation will be decided in due course.

The government plans to provide financial support of Rs 15,000 crore to public sector banks in the current fiscal. The Cabinet has already approved a capital infusion plan that will increase the lending capacity of state-run banks by Rs 1.85 lakh crore. This additional credit availability is likely to benefit employment-oriented sectors,especially agriculture,micro and small enterprises and entrepreneurs.

The government infused Rs 1,500 crore into four public sector banks Vijaya Bank,United Bank of India,Uco Bank and Central Bank of India as part of their recapitalisation package last week. While Vijaya Bank got Rs 700 crore,Uco Bank got Rs 300 crore,the Central Bank of India and United Bank of India received Rs 250 crore each,according to government sources. These banks have been instructed to issue perpetual non-cumulative preference shares (PNCPS) in favour of the President,United Bank of India had said in a statement recently. Accordingly,the bank has issued 25,000 PNCPS of Rs 1 lakh each on June 4 in the name of the President,it had added. Other banks are expected to follow suit.

The fund infusion will enable these banks to maintain comfortable level of capital to risk-weighted asset ratio (CAR) for supporting credit requirement of the productive sectors. Capital adequacy ratio (CAR),also called Capital to Risk (Weighted) Assets Ratio (CRAR),is a ratio of a banks core capital to its assets at risk.