"In the interim budget, the government provided Rs 11,200 crore for the public sector banks. There could be additional provision of Rs 7,000 crore for these banks when government tables regular budget for 2014-15 in June-July," a senior Finance Ministry official said.
The Department of Financial Services would request for additional funds in regular budget as banks require more capital than what has been allocated in the interim budget, the official said.
Even Finance Minister P Chidambaram after interim budget had indicated that the government will provide more funds if it mobilises higher resources.
"What we have provided is what we have budgeted now. This is an Interim Budget. In regular budget you will get a full picture what government can provide as additional capital," he had said.
"As you know, government has provided Rs 11,200 crore for next year. This is not adequate, but that's the budget estimate... As we find more money, we should infuse more into the public sector banks," he had said.
The government infused Rs 14,000 crore in public sector banks during the current financial year ending March 31. Of this, the State Bank of India got Rs 2,000 crore while Indian Overseas Bank received Rs 1,200 crore.
In view of the Basel III, or global prudential banking norms, all banks have been planning to shore up their Tier 1 capital.
According to RBI Indian banks will require an additional capital of Rs 5 lakh crore to meet the new global banking norms, Basel III.
The government, which owns 70 per cent of the banking system, alone will have to pump in Rs 90,000 crore equity to retain its shareholding in the Public Sector Banks (PSBs) at the current level to meet the norms.
Of the total Rs 5 lakh crore, equity capital will be of the order of Rs 1.75 lakh crore and Rs 3.25 lakh crore as non-equity.
RBI recently extended the deadline for Basel III implementation in a phased manner by banks by one year March 2019.
The government infused Rs 20,117 crore in public sector banks during 2010-11, and Rs 12,000 crore in 2011-12.
Source: Economic Times