The Finance Ministry has formally notified recapitalisation of State Bank of India and six other banks for 2011-12. These seven banks will get a total of Rs 12,000 crore.
Apart from SBI, Indian Overseas Bank, IDBI Bank, Punjab National Bank, Central Bank of India, UCO Bank and Bank of Maharashtra are the other banks which will receive money from the Government, a senior Finance Ministry official said. A formal notification to this effect was issued on Friday.
The Government provided Rs 6,000 crore in the Budget for 2011-12, while another Rs 6,000 crore was made available through the third supplementary demands for grants tabled in the Parliament on March 19. This additional capital will help the banks maintain a Capital to Risk Asset Ratio (CRAR) of 8 per cent.
A healthy CRAR shows financial soundness of the bank. It also helps in improving the competitiveness of the banks. According to Basel-1 norms, banks should have minimum of 8 per cent of Tier-1 capital as CRAR. Tier-1 capital means mainly equity capital and disclosed reserve.
PREFERENTIAL ALLOTMENT
Now with the fresh allocation, banks may go for preferential allotment of equity shares to the extent of amount allocated to them.
SBI has already received the approval of the Government to increase the issued capital of the bank by way of preferential allotment of equity shares to the Government to the extent of Rs 7,900 crore. It said with the additional capital, capital adequacy is projected to reach 9.01 per cent on March 31, 2012.
The Government says it is ready to help banks in maintaining CRAR of Tier-1 capital at 8 per cent.
With this aim, even in the Budget for 2012-13, the Finance Minister, Mr Pranab Mukherjee, said, “The Government is committed to protecting the financial health of public sector banks and financial institutions.
“For the year 2012-13, I propose to provide Rs 15,888 crore for capitalisation of public sector banks, regional rural banks and other financial institutions, including Nabard.”
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