Indian banks will require additional capital of Rs 4.95 tn to meet Basel-3 norms: Subbarao

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The Reserve Bank of India (RBI) governor D Subbarao said that Indian banks will require an additional capital of Rs 4.95 trillion, on top of internal accruals, to meet the Basel-3 norms by March 2018.

The governor, speaking at the FICCI-IBA Annual Banking Conference in Mumbai on August 13, 2013, said of the total capital requirement, banks will require Rs 3.3 trillion as non-equity capital and Rs 1.65 trillion as the equity capital.

Subbarao also said that a major chunk of this additional capital requirement belongs to public sector banks (PSBs) which need Rs 4.15 trillion; of which equity capital will be of the order of Rs 1.43 trillion, while non-equity capital will be of the order of Rs 2.72 trillion.

"The Government's contribution to the equity capital of PSBs would be of the order of Rs 900 billion at the existing level of shareholding of the Government. The Government's contribution will come down to approximately Rs 660 billion if its shareholding comes down to 51 per cent," he said in a statement.

This however looks difficult as government, burdened with ballooning fiscal deficit, has infused just Rs 477 billion in the last five years.

RBI said given the government's fiscal constraints, there is still uncertainty over whether it will dilute its shareholding in PSBs to 51 per cent or go further and reduce its shareholding to below 51 per cent while build in some safeguards for retaining requisite management control.

Subbarao added that government may issue shares with differential voting rights or non-voting shares to raise funds. He said government may also choose to reduce its shareholding while inserting a protective clause to protect Government's control over public sector banks.

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Story first published: Tuesday, August 13, 2013, 21:50 [IST]
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