GOVERNMENT TO SANCTION RS 2,000 CR CAPITAL INFUSION FOR FEW BANKS

The government has decided to sanction Rs 2,000 crore to some public sector banks as part of its recapitalisation drive.

"We are in the process of sanctioning Rs 2,000 crore to a few public sector banks, but the the disbursement would take place at later date," official sources told PTI.

The mode of disbursement would be decided later, sources said, adding, the capital infusion would result in raising tier I capital or equity capital of the bank.

Besides, the capital infusion would result in enhancing government's stake in the select banks, sources said.

This is part of the Rs 6,000 crore re-capitalisation amount for the public sector banks announced in the Budget this year.

Finance Minister Pranab Mukherjee in his Budget speech had said, "During the year 2010-11, the government is providing a sum of Rs 20,157 crore for infusion in the Public Sector Banks to maintain Tier I Capital to Risk Weighted Asset Ratio (CRAR) at 8 per cent and increase government equity in some banks to 58 per cent".

"I propose to provide a sum of Rs 6,000 crore for the year 2011-12 to enable Public Sector Banks to maintain a minimum tier I CRAR at 8 per cent," he said.

Most of the public sector banks got capital support from the government during the last fiscal. These banks included Punjab National Bank, Bank of Baroda, Union Bank of India, Oriental Bank of Commerce, UCO Bank and Dena Bank.

In the first phase of recapitalisation in June last year, the government had approved capital support of Rs 6,211 crore into five banks. The banks, which had got capital from the government included Union Bank of India, Bank of Maharashtra, IDBI Bank, UCO Bank and Central Bank India.

Remaining Rs 13,946 crore was disbursed by March, 2011 through mostly preferential allotment of equity.

All the public sector banks have already submitted to the government their capital requirement.

The bank has requested the government capital infusion of Rs 990 crore to fund its business growth, Punjab & Sind Bank Executive Director P K Anand said.

"We have requested the government to infuse additional capital of Rs 990 crore by way of preferential shares," Anand had said earlier this month.

Mangalore-based Corporation Bank has also sought Rs 300 crore capital support from the government.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/government-to-sanction-rs-2000-cr-capital-infusion-for-few-banks/articleshow/9767365.cms