According to the Cabinet Committee on Economic Affairs (CCEA) which met here, the move will enable the banks to maintain a minimum tier-1 CRAR (capital to risk weighted assets ratio) at comfortable level under international bank capital adequacy standard norm BASEL-III.
"This will ensure compliance to the regulatory norms on capital adequacy and will cater to the credit needs of productive sectors of the economy, as well as, to withstand the impact of stress in the economy," the CCEA said in a statement.
"This additional availability of credit will cater to the credit needs of our economy and will also benefit employment oriented sectors, especially agriculture, micro and small enterprises, export, entrepreneurs."
After the CCEA meeting, Finance Minister P. Chidambaram said around 9-10 banks were likely to be recapitalised. PSU banks are plagued by rising non-performing assets (NPA) and write-offs.
Chidambaram said the combined injection of capital would not exceed the Rs.15,000 crore provisioned in the budget for the fiscal year ending 2013.
The CCEA said that the exact amount, mode of recapitalisation and other terms will be decided on an individual basis in consultation with each PSB.
Last fiscal, the government provided Rs.12,000 crore for capital infusion in PSBs.
According to the Economic Survey for 2011-12, the capital infusion had enabled PSBs to "maintain a minimum tier 1 CRAR at eight percent on 31st March, 2012, and also increased shareholding of the government in PSBs to 58 percent".
