Final plan for capital infusion in public banks this week’
he finance ministry is expected to take a crucial decision on infusing Rs 15,000 crore capital in public sector banks this week. “This week there will be some announcement about the allocation (to various banks),” financial services secretary DK Mittal said on Monday.
Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra are the top three banks which require capital, Mittal said, adding that State Bank of India would also need capital.
All but Dena Bank has tier I capital of above 8 per cent, well above Basel norms. While Indian Overseas Bank requires Rs 1,500 crore of capital infusion, Bank of Maharashtra has sought Rs 800 crore from the finance ministry.
“Allocation of the funding will be decided and rest, I think the process still has to go through,” Mittal said, adding that boards of each of the bank would have to decide whether they want to infuse capital through a rights issue.
The finance ministry had pumped in Rs 12,000 crore in public sector banks to maintain their capital adequacy ratio in 2011-12, while it gave Rs 20,157 crore in 2010-11.
The RBI is also broadly on board to a proposal for a financial holding company to raise resources for re- capitalisation of banks.
Union Bank of India expects Rs. 1,000 cr infusion this fiscal
Press Trust of India | Updated On: December 08, 2012 19:37 (IST)
Union Bank of India expects fund infusion of about Rs. 1,000 crore as part of recapitalization plan of the government.
"We have applied and we are expecting about Rs. 950-1000 crore (capital infusion during the current fiscal)," Union Bank of India Chairman and Managing Director D Sarkar said.
"The government has agreed in-principle to infuse the capital and may be in a week’s time we will be getting information from the government," he added.
Last fiscal, the state-owned bank got capital support of Rs. 280 crore.
With the infusion, Tier I capital of the bank will go up, he said, adding, it was 8.17 per cent as on September 2012.
The capital infusion will help the bank to enhance lending to productive sectors.
The government has made budget provision of Rs. 15,000 crore for recapitalisation of public sector banks in the current fiscal.
In 2010-11, the government pumped Rs. 20,157 crore in public sector banks to maintain Tier I capital at 8 per cent and increase the government equity in some banks to 58 per cent.
In the following fiscal, public sector banks got Rs. 12,000 crore for improving their capital adequacy ratio.
On the stressed assets, Sarkar said, rise in NPA is reflection of economic situation. With improvement in the economy, things would get better.
"We aim to bring down the gross NPA to 3 per cent of the total advances by March 2013," he added. Gross NPA of the bank stood at 3.66 per cent at the end of first half of the current fiscal.
Asked about the expectations from upcoming mid-quarter review of monetary policy by RBI, Sarkar said: "As a banker I expect that there should be some reduction in the policy rates. It will boost up the sentiment and economic sentiment."
There is expectation that repo rate or CRR could come down by about 25 basis points, he said.
On concerns of sticky inflation, the Reserve Bank of India (RBI) left key policy rates unchanged in its last quarterly review of the monetary policy in October.
"We have applied and we are expecting about Rs. 950-1000 crore (capital infusion during the current fiscal)," Union Bank of India Chairman and Managing Director D Sarkar said.
"The government has agreed in-principle to infuse the capital and may be in a week’s time we will be getting information from the government," he added.
Last fiscal, the state-owned bank got capital support of Rs. 280 crore.
With the infusion, Tier I capital of the bank will go up, he said, adding, it was 8.17 per cent as on September 2012.
The capital infusion will help the bank to enhance lending to productive sectors.
The government has made budget provision of Rs. 15,000 crore for recapitalisation of public sector banks in the current fiscal.
In 2010-11, the government pumped Rs. 20,157 crore in public sector banks to maintain Tier I capital at 8 per cent and increase the government equity in some banks to 58 per cent.
In the following fiscal, public sector banks got Rs. 12,000 crore for improving their capital adequacy ratio.
On the stressed assets, Sarkar said, rise in NPA is reflection of economic situation. With improvement in the economy, things would get better.
"We aim to bring down the gross NPA to 3 per cent of the total advances by March 2013," he added. Gross NPA of the bank stood at 3.66 per cent at the end of first half of the current fiscal.
Asked about the expectations from upcoming mid-quarter review of monetary policy by RBI, Sarkar said: "As a banker I expect that there should be some reduction in the policy rates. It will boost up the sentiment and economic sentiment."
There is expectation that repo rate or CRR could come down by about 25 basis points, he said.
On concerns of sticky inflation, the Reserve Bank of India (RBI) left key policy rates unchanged in its last quarterly review of the monetary policy in October.
Govt may infuse Rs 4,000-cr capital into SBI this fiscal
The Government is expected to infuse Rs 4,000 crore into State Bank of India this fiscal. This will boost the bank’s capital adequacy ratio to over 13 per cent, according to a top bank official.
“The mode (of infusing capital) is being discussed and we have given various options. It is the government’s call to decide on how to infuse that equity,” said Diwakar Gupta, Managing Director, SBI.
The country’s largest bank’s has been awaiting the Government’s nod for the rights issue for more than two years.
When asked if the rights issue would be appropriate in the current volatile market conditions, Gupta emphasised that issue size is only Rs 4,000 crore. On a rights basis, it would work out to about 1 share for every 19 or 20 shares.
“So, it is a very small issue…But the rights issue is a very fair way of offering capital. There are pros and cons of every mode (of capital raising) and that is being evaluated,” Gupta said.
The Rs 4,000-crore capital infusion is adequate for the bank and will take its capital base above 13 per cent, Gupta added.
As on September 30, 2012, SBI’s capital adequacy ratio stood at 12.63 per cent, against 11.40 per cent in the year-ago period. CAR is a key indicator of a bank’s financial strength expressed as a ratio of capital to risk-weighted assets.
The government earlier this week had said it would finalise the capital infusion plans for public sector banks this week. The budget has earmarked nearly Rs 15,800 crore for shoring up the core capital base of the state-run lenders hit by bad loans and poor asset growth.
On the revival of the economic conditions, Gupta said the effect of the reforms announced will take time to impact the real economy. “We see some revival in 2-3 months,” Gupta added.
DEPOSIT CARTELISATION
Gupta rubbished allegations that big banks had cartelised by keeping the interest rate on savings bank deposit rates steady at 4 per cent despite the Reserve Bank of India deregulating this rate.
The SBI MD said the decision to leave the SB rate unchanged was a purely commercial decision and did not amount to cartelisation.
Gupta said he has been reading reports over the past few days about a possible action by the competition watchdog on banks for allegedly acting as a cartel by not increasing the rate on saving deposits.
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