Finance ministry may solve PSU banks' cash crunch problem
17 Nov 2007
Not just State Bank of India, but other PSU banks will also get much needed capital. CNBC-TV18 has learnt from sources that the finance ministry is setting aside Rs20,000 crore for the recapitalisation of nationalised banks.
How exactly is the finance ministry planning to solve the cash crunch faced by the nationalised banks?
The ministry has created a pool of Rs20,000 crore, out of which Rs10,000 crore will be used by the government for subscribing to the rights issue of the State Bank of India.
The other Rs10,000 crore will be given to banks on a demand basis and depending on what their need really is. It is learnt that several mid sized nationalised banks like Andhra Bank, Oriental Bank of Commerce, Vijaya Bank, Dena Bank, Union Bank of India have reached the 51 per cent government shareholding mark, as a result of which they cannot dilute any more equity.
So, it will be difficult for them to sustain a loan growth of say 20 per cent to 25 per cent. It is worth noting that Basel II norms come in to force in April 2008.
According to official sources, these nationalised banks are in need of capital infusion and the SBI rights issue is a first that will come through.
