Rs.12,000 crore supplement demand for grant for banks’ recapitalisation

New Delhi, July 31 (IANS) The government on Friday presented to parliament a supplementary demand for grants to provide for Rs.12,000 crore towards recapitalization of public sector ba(PSBs).

Finance Minister Arun Jaitley plans to provide Rs.25,000 crore capital each in the current and next fiscal year, while Rs.20,000 crore would be provided during 2017-18 and 2018-19, the finance ministry said in a statement here.

The Rs.25,000 crore this year will be provided through three tranches.

Around 40 percent of the amount will be given to those banks which require support, and all PSBs will be brought to the level of at least 7.5 percent core capital by fiscal 2016, the ministry said.

In the second tranche, 40 percent of capital will be allocated to State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank.

The remaining portion of 20 percent will be allocated to the banks based on their performance during the three quarters in the current year.

Jaitley has allocated Rs.7,940 crore in the budget for recapitalisation of public sector banks in this fiscal.

The union cabinet had in December allowed state-run banks to raise up to Rs.160,000 crore from the capital markets by diluting the government stake in phases to 52 percent.

As per an estimate, public sector banks would need additional capital of up to Rs.240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.

The government said that as of now, the public sector banks “are adequately capitalized and meeting all the Basel III and RBI norms”.

However, it wants to adequately capitalize all the banks to keep a safe buffer over and above the minimum Basel norms.

Minister of State for Finance Jayant Sinha told reporters here that the government could provide more capital to the banks, if required.

“We have a robust recapitalisation plan in place,” he said.

The Reserve Bank of India said last month that state-run banks are adequately capitalised, but would need additional funds to comply with international capital adequacy norms in the future.

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