NEWS & ADVICE : CAR LOANS
PSUs demand funds worth Rs. 40,000 crore
By Vaibhav Aggarwal
Nov 18, 2009
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All public sector banks have sought funds worth Rs. 40,000 from the centre in order to expand credit in next three years. These banks include associates of State Bank of India and IDBI.

However, the government can only provide capital worth Rs. 14,000 crore ($ 3 billion), which is being offered by the World Bank. The World Bank has promised to lend $2 billion to the Indian government to aid state-owned banks to expand credit and maintain a good capital adequacy ratio (CAR).

SBI's chairman OP Bhatt said that the bank had asked for Rs. 20,000 crore from the centre but it was not approved by the finance ministry since the bank had been provided a support of Rs. 10,000 crore in March 2008 at the time of rights issue.

All state-run banks have been asked to maintain a CAR of 12 percent, 3 percent greater than what is laid down in Basel II norms.

A finance Ministry official said, "All the banks have sent us proposals. Their demand is about Rs 40,000 crore, but at the moment we do not have more than Rs 10,000 crore (which is the $2 billion budgetary support from the World Bank). It will go up when another $1 billion comes, but even then we will have to prune it ... We are examining whether their demands are genuine."

The official pointed out that the government had already asked the banks about their credit expansion plans and accordingly decided the amount they required.

 


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