The World Bank is likely to approve by the end of this month a proposal to provide $3 billion (nearly Rs 15,000 crore) to the government to recapitalise public sector banks.
While $2 billion from this is expected to be disbursed by December or so, the remaining amount is expected at the end of next year.
The government had proposed Rs 18,000 crore to replenish the capital of state-owned banks during the current fiscal year in a bid to boost their balance-sheet muscle in line with international regulatory standards to help them lend more money to companies and individuals.
Barring a handful like the State Bank of India and Punjab National Bank, most public sector undertaking (PSU) banks are likely to get a share of the capitalisation funds.
“We are planning to recapitalise most of the banks except just three or four,” a senior government official told HT.
Three public sector banks —UCO Bank, Central Bank of India and Vijaya Bank — have already got Rs 3,800 crore.
The fund would help these banks to shore up their capital adequacy ratio (CAR) while helping them to adhere to the stringent Basel II norms.
Several banks including the United Bank of India and Punjab and Sind Bank also have the option of raising additional funds by tapping the capital market.