Government's capital infusion to raise public sector banks credit risk capacity: CRISIL
02 Dec 2010
The central government's decision to infuse additional capital of Rs6,000 crore (approximately $1.3 billion) in public sector banks will further strengthen their credit risk profiles, says credit risk assessment agency, CRISIL.
The government's move is expected to increase its shareholding in public sector banks to at least 58 per cent, thereby increasing their financial flexibility to raise additional capital from the market, by diluting the government's stake.
"Currently, the centre has a shareholding below 58 per cent in 10 public sector banks, some of which stand to benefit from this move.
The proposed capital infusion over and above the already approved commitment of Rs15,000 crore for 2010-11, further reinforces CRISIL's belief that these banks will continue to receive strong government support," the agency said in a statement.
In July 2009, CRISIL had upgraded its ratings on eight public sector banks and raised its outlook on another three, based on a reassessment of support from the centre, their principal shareholder.
The reassessment was based on government's intention to maintain a minimum holding of 51 per cent in these PSBs.
