Govt. will inject 16,000 Crore into PSBs

By siliconindia   |   Monday, 08 June 2009, 21:15 IST   |    1 Comments
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Govt. will inject Rs.16,000 Crore into PSBs
Bangalore: The government plans to inject Rs 16,000 crore in a move to help public sector banks to meet their domestic financing requirements and to boost their capital base. The plan was proposed by President Prathiba Patil during her parliamentary address, which revealed the government's plans to recapitalize public sector banks. The government plans to do this by subscribing to equity shares through right issues, since funding from overseas has dried up because of the global credit crunch. When public sector banks have over nine percent capital adequacy ratio, the government plans to provide them capital to help in boosting lending. The banks in line for capital infusion are United Bank of India, Dena Bank, Bank of Maharashtra and IDBI bank. One of the factors that have limited the accessibility of these banks to capital markets for raising fresh equity has been the 51 percent floor on government ownership. Although the Reserve Bank of India (RBI) has suggested lowering the floor, the President said in her speech that the government planned to continue its holding in public sector companies at over 51 percent. The government had already provided over Rs 3,800 crore to Punjab & Sindh Bank, Vijaya Bank, Central Bank of India and UCO Bank. In addition, it had also provided Rs 10,000 crore to the State Bank of India in March 2007. Government sources said that negotiations with the World Bank to raise around 16,000 crore long-term debt were in the advanced stages. Besides this, the net worth of these banks will also be bolstered and the additional funds will also help them to leverage it to raise their own funds. The government has already allowed India Infrastructure Finance Company to raise Rs 40,000 crore through tax-free bonds.