7 PSU Banks Allowed to Raise Funds from Capital Markets

The government allowed seven public sector banks (PSBs) to tap markets for raising capital needed for expansion and capital adequacy, saying it has limited fiscal space to recapitalise lenders, reported PTI.

The government had infused capital of Rs 14,000 crore during 2013-14 in 14 PSBs and decided to infuse Rs 6,990 crore in nine 9 PSBs during 2014-15, a Finance Ministry statement said.

"Further approvals have been given in 2014-15 to seven PSBs to raise capital from the market," it said.

7 PSU Banks Allowed to Raise Funds from Capital Markets

"The government doesn't have space to give Rs 20,000 crore or 25,000 crore (for capital infusion) ... If banks require further capital they have other means to raise capital including from raising capital from market," Financial Services Secretary Hasmukh Adhia told reporters.

In Budget, Finance Minister Arun Jaitley had proposed infusing Rs 7,940 crore funds next fiscal in the public sector banks to enable them maintain adequate capital.

"We don't have fiscal space and banks are adequately capitalised for the moment. There is no immediate need to raise funds from the market," Adhia said.

However, the statement did not disclose names of banks which have got government approval for raising capital through market, not did it give quantum and timing of such public issues.

The Government decision to reduce the shareholding of PSBs to 52 per cent would also give these banks headroom to raise capital from the market.

All these efforts are being undertaken to allow the PSBs to meet the Basel-III capital requirements, it said.

Finance Minister Arun Jaitley in Budget 2015-16 had said: "The provision is for recapitalisation of public sector banks to enable them to maintain their Tier-I capital at comfortable level."

"In order to raise funds, banks have been allowed to reduce government stake to 52 per cent," he had said.

For the current fiscal, the government had proposed capital infusion of Rs 11,200 crore. However, against that the government disbursed Rs 6,990 crore to 9 public sectors banks including SBI, BOB, PNB, Canara Bank and Indian Bank based on their performance.

In December 2014, the government had allowed PSU banks to raise funds from markets by diluting government holding to 52 per cent.

Government's holding in 27 state-run banks range between 56 per cent to 84 per cent.

Out of 27 PSBs, Government of India controls 22 through majority holding. In the remaining 5 banks, state-run SBI holds majority stake.

Public sector banks require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms.

Read more about: banks, capital market
Story first published: Thursday, March 12, 2015, 9:00 [IST]
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