$3.2 Billion loan for Indian banks may get delayed
By siliconindia   |   Thursday, 18 June 2009, 15:58 IST   |    7 Comments
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$3.2 Billion loan for Indian banks may get delayed
Bangalore: The recapitalization of more than a dozen government-owned banks might get delayed by six to seven months, reports Economic Times. According to a senior finance ministry official, World Bank preconditions may delay the $3.2-billion loan to banks. The World Bank seems to have asked the government to reduce its stake in the banks and do away with concessional lending rates for priority sector. It has also asked for a broad business plan, of the banks which will be recapitalised with the loan. Negotiations between both sides are on as the government is in no hurry to meet these conditions. "The pre-conditions are not acceptable. Besides, the capital adequacy ratio of our banks is well above the prescribed norm of nine percent," said the official, who did not wish to be named. The government wishes to pump around Rs 16,000 crore in 16 banks by 2011. It is keen on World Bank funds due to the low 3-4 percent interest; a loan from other sources could take the borrowing cost up to nine percent. The loan period however is under negotiation. "The World Bank wants to disburse the amount in four tranches, but it's not such a big amount and can be easily given in two tranches," said the official. There are totally 25 state-owned banks and the government has already pumped Rs 3,800 crore into Uco Bank, Central Bank of India and Vijaya Bank. It now plans to infuse another Rs 1,700 crore into United Bank of India, Dena Bank and Maharashtra Bank. While United Bank of India will be given Rs 700 crore, the rest of the amount will be distributed between Dena Bank and Maharashtra Bank.

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