The government has formed a committee to look into the capital requirements of public sector banks in the light of the Basel-III norms, which the banks will start implementing from 2013. The finance ministry on Saturday reiterated that the government is committed to seeing its banks are well capitalised.
“We have set up a small group, which is looking at capital requirements of public sector banks. Next month, we will have a final strategy. But the government is committed to capitalising banks fully not only this year but also for Basel-III requirements,” D K Mittal, secretary, financial services said on Saturday.
He said the government would ensure it continues to hold at least 58 per cent stake in public sector banks and that these banks maintained a Tier-I capital of eight per cent, higher than what is mandated by the Reserve Bank of India (RBI). According to the RBI norms, banks need to maintain a capital adequacy ratio of minimum nine per cent with six per cent Tier-I capital.
Mittal said the government has received request for capital infusion from six-seven banks, including the country’s largest lender State Bank of India. Earlier, SBI had requested the government for fund infusion to the tune of Rs 20,000 crore through a rights issue of equity shares. However, it revised its proposal by lowering its fund requirement.
“Not only SBI, there is a requirement of six-seven banks. Every bank will be given money as per the decision of the cabinet. So the eight per cent and 58 per cent are sacrosanct to us. This year’s budget (for bank re-capitalisation) so far is Rs 6,500 crore, but we will go for second supplement in December after this committee decides on the amount,” he said.
Finance minister Pranab Mukherjee, who met the chairmen and managing directors of the public sector banks based in the western part of the country, said the centre wants the state governments to closely monitor the grant on approval of projects funded by banks.
Mukherjee said he has suggested to strengthen institutional arrangement between the states and bankers. “If the chief minister meet bankers of the state, most of the issues would be solved and will ensure seamless flow of credit to needy sectors. Performance of banks in the western zone has been encouraging,” he said.
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The minister asked banks to provide full credit to micro, small and medium enterprises (MSME) and said there should be at least 20 per cent growth year on year in MSME lending.
“Banks are provided money and that money is locked up. If the project cannot be implemented due to lack of clearances of various authorities, then the bank money remains unused. Also, there is a time and cost overrun of the project as a result of which, value of the project is eroded,” Mukherjee said.