The interim Budget to be presented in the Lok Sabha is likely to provide for Rs 2,150 crore of recapitalisation package for three public sector banks -- UCO Bank, Central Bank of India and Vijaya Bank
The package is aimed to help these banks to shore up their capital to over 12 per cent against various kinds of risks.
UCO Bank is expected to get Rs 750 crore next fiscal, while Central Bank of India and Vijaya Bank will receive Rs 700 crore each, according to indications.
The amount would form a part of Tier I Capital and the infusion would increase the government holding in the three state-run banks depending on the instrument through which the funds are raised.
Under Tier I, banks can raise capital as equity and innovative instruments like perpetual non-cumulative preference shares and perpetual bonds.
The government holding in Central Bank of India currently stands at 80.20 per cent, in UCO Bank at 75.98 per cent, while in Vijaya Bank it is at 53.87 per cent.
At the same time, India Infrastructure Finance Company Limited is likely to be allowed to raise Rs 30,000 crore tax-free bonds for refinancing of projects mainly in the highway and port sector.
The move will boost demand for raw materials like cement, steel, which will revive the slowing down economy as well as generate more employment.