The Government has started with the process of recapitalizing public sector banks. The Government would be infusing capital worth Rs. 9500 crore for the same purpose in the first quarter next year and Rs 7000 crore would be pumped in during the remaining part of the upcoming fiscal.
The Union Budget 2010-11 had last month declared that Rs.16, 500 crores would be infused into public sector banks for recapitalization. The measure has been taken so as to enable these banks to maintain a comfortable capital adequacy ratio (CAR).
CAR refers to the ratio of the capital fund of a bank to its risk weighted assets in percentage terms.
R Gopalan, secretary, Department of Financial Services said that those banks which do not have a CAR above 8 % would be given priority in the recapitalization process.
Bank of Maharashtra, Allahabad Bank, Central Bank of India, Dena Bank, Indian Overseas Bank, Syndicate Bank, UCO Bank, Vijaya Bank, Canara Bank and IDBI Bank are likely to benefit from this step by the Government.
"We will withdraw the World Bank loan in April or May. We will try to give it to banks as soon as possible after taking the Cabinet approval. Another loan of $1.2 billion will come later," he said.
He also clarified that the Government has not signed any agreement for the second loan with World Bank. The two World Bank loans add to Rs 14,500 crore approximately. The remaining Rs. 2000 crores would be given by the Government from his own resources.
The Government had infused Rs. 1,900 crore as Tier I capital in four public sector banks in the year 2008-09 so that they could maintain a healthy CAR.
Mr.Gopalan said that the SBI would not need any amount from the Rs. 16.500 crores of capital.