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Reserve Bank of India Governor D. Subbarao suggested that the government should consider bringing its stake down to 51 per cent in the 21 state-run banks to help them meet Basel-III requirements.
The government holds more than 60 per cent stake in some public sector banks such as State Bank of India, Central Bank of India, and Indian Bank.
“If the Government opts to maintain its shareholding at the current level, the burden of recapitalisation will be of the order of Rs 90,000 crore; on the other hand, if it decides to reduce shareholding in every bank to a minimum of 51 per cent, the burden reduces to under Rs 70,000 crore,” Subbarao said.
According to RBI estimate, the banking sector will need an additional Rs 5 lakh crore to meet the Basel-III norms by March 31, 2018. Of this, about Rs 1.75 lakh crore will have to be raised by banks through equity financing.
He said that banks can also tap the markets to raise a part of equity. He, however, said that this will not be easy given the current economic situation.
Subbarao said the markets will have to provide between Rs 70,000 crore to Rs 1 lakh crore based on how much capital the Government provides to the banks. He said, since banks have raised Rs 52,000 crore from the primary markets in the last five years raising an additional Rs 70,000 crore to Rs 1 lakh crore should not be an insurmountable problem.
The government holds more than 60 per cent stake in some public sector banks such as State Bank of India, Central Bank of India, and Indian Bank.
“If the Government opts to maintain its shareholding at the current level, the burden of recapitalisation will be of the order of Rs 90,000 crore; on the other hand, if it decides to reduce shareholding in every bank to a minimum of 51 per cent, the burden reduces to under Rs 70,000 crore,” Subbarao said.
According to RBI estimate, the banking sector will need an additional Rs 5 lakh crore to meet the Basel-III norms by March 31, 2018. Of this, about Rs 1.75 lakh crore will have to be raised by banks through equity financing.
He said that banks can also tap the markets to raise a part of equity. He, however, said that this will not be easy given the current economic situation.
Subbarao said the markets will have to provide between Rs 70,000 crore to Rs 1 lakh crore based on how much capital the Government provides to the banks. He said, since banks have raised Rs 52,000 crore from the primary markets in the last five years raising an additional Rs 70,000 crore to Rs 1 lakh crore should not be an insurmountable problem.
NORMS FOR D-SIBs
The Governor also mentioned that the Basel committee is working on a framework for domestic systemically important banks (D-SIBs) to prescribe higher loss absorbency capital standards for them.
He said the notion that some banks are too big to fail took a blow after the financial crisis. Basel III seeks to mitigate this by identifying global systemically important banks (G-SIBs) and mandating them to maintain a higher level of capital depending on their level of systemic importance.
satyanarayan.iyer@thehindu.co.in
He said the notion that some banks are too big to fail took a blow after the financial crisis. Basel III seeks to mitigate this by identifying global systemically important banks (G-SIBs) and mandating them to maintain a higher level of capital depending on their level of systemic importance.
satyanarayan.iyer@thehindu.co.in
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