FinMin to use disinvestment funds to bolster banks’ capital
The government plans to infuse close to Rs.17,000 crore in state-owned banks in 2013-14, HT reports.india Updated: Dec 23, 2012 22:20 IST
The finance ministry is readying moves to use part of the money it raises by selling stakes in state-owned companies to bolster the capital base of public sector banks and insurance companies.
The government plans to infuse close to Rs.17,000 crore in state-owned banks in 2013-14, to ensure that their capital reserves do not remain uncomfortably close to the minimum stipulated levels over a long period of time.
The capital support is aimed at strengthening the tier I capital of banks. According to regulatory requirements, banks are required to maintain a minimum of 8% tier-I capital, which broadly refers to shareholder equity.
The government proposes to change the terms of the fund from 2013-14. “The fund, if the changes are approved, will be used for subscribing to rights issues of public sector banks and insurance companies, preferential allotment of such companies and recapitalisation of banks,” said sources.
Under the proposed norms, the disinvestment process from 2013-14 will be credited to the existing public account under the NIF. The NIF currently is managed professionally by fund managers including asset management companies of LIC, UTI and SBI .
“The government plans to free fund managers currently managing NIF from these responsibilities,” said sources.