More capital expected for the state-run banks

Fresh capital worth Rs 10,000 crore is expected for the public sector banks. Official sources said that Credit amounting to $2 billion is likely to come by November end and thereafter disbursal to individual banks will start depending on the financial status of each bank at that time.



The loans are a part of the World Bank's $14 billion crisis-related lending for India. This will help the country in faster recovery.

This credit infusion would ensure credit flow in productive sectors. It aims at enabling banks to maintain a Capital to risk weighted assets ratio (CRAR) of 12 percent in order to sustain economic growth.

The finance Ministry have received petitions from various banks regarding a share of these funds and the ministry is examining these requests.

Earlier this month, the World Bank's executive board approved a loan of $2 billion with the. The loan is intended at helping infrastructure development, small and medium enterprises and the rural economy.

World bank Country director for India said that he preferred to call it " injection of capital" to "recapitalization" since liquidity was not an issue for the Indian banking sector. He added that the sector had done "remarkably well".

Dena bank has asked the government for a capital infusion of Rs 500 crore whereas union Bank of India has approached the government for a capital infusion of Rs. 1800 crore for its expansion plans. Punjab Sind Bank has asked for Rs 700 crore during the current fiscal. Besides these, UCO Bank, Central Bank of India and Vijaya Bank - together are expected to get Rs 2,150 crore.

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Rs 10,000-cr of WB fund to flow into banks by December

More than half a dozen PSU banks are expected to get about Rs 10,000 crore as fresh capital by December following the World Bank board's decision to inject funds into these PSBs and enhance their capacity to lend.


Loans worth $2 billion is likely to come by the end of November and thereafter disbursal to individual banks would start depending on the financial status of each bank at that time, said official sources.

Various banks have requested for capital infusion and the Finance Ministry is examining those request, sources said.

Earlier this month, the executive board of the World Bank approved $2 billion loan to enhance banks' capital.

The World Bank fund would be utilised to shore up their capital against various risks to ensure credit flow to productive sectors.

The capital infusion would come with the objective to enable banks to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent to ensure credit growth continues to sustain economic growth.

The World Bank's $2 billion Banking Sector Support Loan, with 30 year maturity, would help select public sector banks expand credit for infrastructure development, small and medium enterprises, and the rural economy.

Preferring to call it "injection of capital" instead of "recapitalisation" as the latter could mean banks are short of capital, World Bank Country Director for India Roberto Zagha had said liquidity is not an issue with the banks as the Indian banking sector has done "remarkably well".

Many public sector banks like Union Bank of India, Dena Bank, Punjab Sind Bank, Bank of Maharashtra, UCO Bank, Central Bank of India and Vijaya Bank.

Dena Bank has requested the government for capital infusion of Rs 500 crore while Punjab Sind Bank has asked for Rs 700 crore during the current fiscal.

At the same time, UBI has approached the Centre for a capital infusion of Rs 1,800 crore to fuel its expansion plans.

"We have asked for Rs 1,800 crore capital from the government. Whether this will be availed in equity or some other form remains to be worked out," UBI Executive Director S Raman had said.

Besides, three public sector banks — UCO Bank, Central Bank of India and Vijaya Bank — together are expected to get Rs 2,150 crore.

UCO Bank is expected to get Rs 750 crore, while Central Bank of India and Vijaya Bank will receive Rs 700 crore each

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