Business & Economy

Cabinet approves capital infusion of Rs 12,517 crore in public sector banks in 2012-13

NetIndian News Network

New Delhi, January 10, 2013

The Union Cabinet today approved a proposal to provide capital funds to public sector banks (PSBs) to the tune of Rs 12,517 crore to maintain their Tier-l Capital to Risk (Weighted) Assets Ratio (CRAR) at  comfortable levels so that they remain compliant with the stricter capital adequacy norms under BASEL-III.

An official press release said this would also support internationally active PSBs for their national and international banking operations undertaken through their subsidiaries and associates. 
The release said "in principle" approval of the Cabinet was accorded for need-based additional capital infusion in PSBs from the year 2013-14 to 2018-19 for ensuring compliance to capital adequacy norms under 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. This will also support national and international banking operations of PSBs and will boost the confidence of investors and market sentiments, the release said.
According to the release, the infusion of Rs. 12,517 crore in the equity capital of PSBs would enable them to expand their credit growth. This additional availability of credit will cater to the credit needs of the economy and will also benefit employment-oriented sectors, especially agriculture, micro & small enterprises, export, entrepreneurs and so on in promotion of their economic activities which would, in turn, contribute substantially to the growth of the economy. 
The exact amount, mode of recapitalization and other terms and conditions in each PSB would be decided in consultation with them at the time of infusion, the release said.
Implementation of Basel III Capital Regulations enhances requirement of core equity capital by banks due to higher capital ratios. The Basel III capital ratios will be fully phased in as on March 31 2018. The requirement of core equity will also increase due to increase in RWAs of banks under Basel III, as risk weights in the areas of credit risk including counterparty credit risk, external credit assessments and market risk are higher than those in present regime of Basel II, the release added.
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