The government on Monday said it intends to increase its holding in public sector banks where it holds close to the mandatory 51 per cent to facilitate their fund raising.
"We are looking at increasing government holding in those state-run banks where the government has just over 50 per cent holding. At some point of time in the future, if they want to raise capital, this will help them," Financial Services Secretary R Gopalan told reporters in Mumbai.
Once the government's stake goes up it would provide banks headroom to raise capital by diluting stake in future.
This will part of the capital infusion plan wherein the government intends to infuse Rs 15,000 crore during the current fiscal to shore up capital of banks.
Finance Minister Pranab Mukherjee in the last budget speech had announced that the government planned a capital support of Rs 15,000 crore to public sector banks during the current fiscal to ensure that these entities could attain a minimum 8 per cent tier-I capital by March 31, 2011.
Earlier this month, the government had approved infusion of Rs 6,211 crore into five public sector banks --Union Bank of India, Bank of Maharashtra, IDBI Bank, UCO Bank and Central Bank India-- a move which will help in lending an additional Rs 77,637 crore to various sectors of the economy.
The second phase of capital infusion into public sector banks will be done in due course, he said, adding the government has not worked out its modalities as yet.
There are six public sector banks where the government holding is less than 55 per cent. Those who fall in the category include Bank of Baroda, Oriental Bank of Commerce, Andhra Bank, Dena Bank, IDBI Bank and Vijaya Bank.
The Centre's holding in Bank of Baroda stands at 53.8 per cent, Oriental Bank of Commerce 51.1 per cent while in case of Andhra Bank, it is 51.6 per cent. IDBI Bank, Dena Bank and Vijaya Bank, the government holding is 52.7 per cent, 51.2 per cent and 53.9 per cent respectively.
On the base rate, he said, the new lending rate system will be implemented from July 1.