Public sector banks to get Rs15,000-crore capital boost

The government today approved plans to infuse Rs15,000 crore in Tier I capital instruments of state-run banks in the current financial year (2010-11), in order to augment credit flow from these banks.

The government said it plans to tap two banking sector support loans (BSSL), totalling $3.2 billion, from the World Bank for implementing the capital infusion scheme.

The Budget for the year 2010-11 has made a provision of Rs15,000 crore towards this while formalities in respect of the first tranche of $2 billion loan have already been completed, a government release said.

The proposal approved by the union cabinet today provides for infusion of capital funds to public sector banks (PSBs) during the 2010-11 and 2011-12 financial years, so as to enable them maintain a minimum 8 per cent Tier I capital to meet the credit requirement of the economy.

For the year 2010-11, the government proposes to infuse around Rs15,000 crore in Tier I capital instruments of the PSBs. The exact amount, mode of capitalisation and other terms and conditions will be decided in consultation with the banks at the time of infusion, a government release said.

For the year 2011-12, additional capital requirements, if any, will be worked out in consultation with the PSBs based on their third quarter results for the year 2010-11, the release said.