Recapitalisation may jack up govt stake in some PSU banks | business | Hindustan Times
Today in New Delhi, India
Apr 29, 2017-Saturday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Recapitalisation may jack up govt stake in some PSU banks

As part of the recapitalisation plan for public sector banks, the finance ministry is working looking to infuse equity in all banks where the government holding has dropped below 60 per cent, to bring it up to the minimum required.

business Updated: Oct 22, 2009 21:47 IST

As part of the recapitalisation plan for public sector banks, the finance ministry is working looking to infuse equity in all banks where the government holding has dropped below 60 per cent, to bring it up to the minimum required.

“The idea is to provide flexibility to PSBs to visit the market and raise capital as and when required, those banks which have less than 60 per cent government stake have limited scope to go to the market,” said a government official who did not wish to be named.

Of the 20 listed PSBs, there are 12 banks where the government’s holding has gone below 60 per cent and in order to bridge the gap the banks will have to issue fresh equity to be subscribed by the government.

The list includes banks such as SBI, Bank of Baroda, Punjab National Bank and Oriental Bank of Commerce among others.

Going by the government holding in the banks and the share prices as on October 21, the government will have to infuse a total capital Rs 15,059 crore to take its stake up to a minimum of 60 per cent in the 12 listed PSBs in question.

The highest capital infusion would be required in Bank of Baroda and State Bank of India, at Rs 2,848 crore and Rs 2,218 crore respectively.

The World Bank has already provided a loan of Rs 20,000 crore for the recapitalisation of banks.

While the government plans to increase its stake in such banks to 60 per cent, it has no plans to dilute its stake in banks where its has holding beyond 60 per cent.

“In such banks fund raising will be done through innovative perpetual debt instrument or perpetual non convertible preference share that will not dilute the government’s holding in the bank,” said the official. “The final plan would be ready by December.”

Banks like Vijaya Bank, UCO Bank, United Bank and Central Bank were partly recapitalised in the financial year 2008-09.

The recapitalisation exercise would also help banks to increase their capital adequacy ratio — a banks capital to its risk, which indicates lending headroom — to a minimum of 12 per cent.

Is Your Couch Making You Cough?
Promotional Feature