FinMin may stick to capital infusion plan for PSU banks

  • The Finance Ministry would not curtail its capital infusion plan for this financial year even as state-owned banks would be needing lesser funds following the Reserve Bank’s decision to defer the deadline to meet Basel III norms by a year, according to sources.

  • Under the new dispensation, the capital infusion by the government in public sector banks (PSBs) for meeting the capital buffer norms would come down to around ₹15,000-20,000 crore, sources said. However, there will not be any reduction in the capital funding plan as announced in October last year despite a lower requirement due to the RBI extending the deadline for meeting the CCB of 2.5%, under Basel-III norms, until March 2020, sources said. The extension could reduce the burden of PSBs by ₹35,000 crore this fiscal, according to rating agency Crisil.

  • After assessing the requirement of each bank, the ministry is expected to finalise capital infusion of about ₹54,000 crore by this month-end or by the first half of the next month.

‘Growth capital’

  • The infusion would help improve banks’ financial health, sources said, adding that some banks would get necessary regulatory capital while others would get it for fuelling growth.

  • The CCB is currently at 1.875% and the remaining 0.625% was to be met by March 2019. Generally, there is a leverage of 10 times on the capital, sources said, adding that the lending capacity would increase by ₹3.5 lakh crore.

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