UCO, Vijaya Bank and Central Bank to get Rs Rs3,800 crore fresh capital

The government has approved infusion of fresh capital into three public sector banks - Central Bank of India, UCP Bank and Vijaya Bank – by end-March 2010, home minister P Chidambaram said today.

The cabinet has, as a part of the on-going process, approved the infusion of additional capital into Central Bank of India (Rs1,400 crore), UCO Bank (Rs1,200 crore) and Vijaya Bank (Rs1,200 crore), according to a government press release.

The government will subscribe to the Tier-I innovative capital instruments which banks will float in two tranches. The first tranche in 2008-09 is expected to be of the order of Rs1,650 crore, the release.

The government has announced plans to recapitalise public sector banks to enable them to maintain comfortable level of capital for supporting the credit requirement of the productive sectors of the economy.

The injection will see the capital to risk-weighted assets ratio (CRAR) or capital adequacy ratio of these banks increased to 12 per cent.

With the global financial crisis affecting the capital market, Indian banks have been unable to raise fresh equity. The banks, however, have to adhere to the capital adequacy rules laid down by the Reserve Bank of India and meet priority sector credit requirements as directed by the RBI and the government.