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.
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.