Govt to infuse Rs 2 lakh cr into banks by 2020

The government plans a whopping Rs 2 lakh crore capital infusion into the state-owned banks spread over 10 years, to help them meet fund requirement and comply with the Basel-III capital adequacy norms.

"[Capital infusion is] estimated at Rs 2 lakh crore by 2020 in public sector banks," D K Mittal, Secretary Department of Financial Services told PTI.

The government, sources said, will be looking at various instruments to pump more capital into the state-owned banks.

"One of the instruments being looked into is non-voting shares," an official said, adding the efforts would help the banks to meet Basel III requirements.

Non-voting shareholders get better returns than normal shareholders on their investment but have no voting rights.

Implementation of the Basel III norms is scheduled to commence from January 1, 2013, and has to be completed by January 1, 2019.

The official further said the Government would like to keep a buffer in its shareholding of banks at around 58% as it would provide it "enough legroom" to maintain a controlling stake even it does not participate in the capital raising exercise by any bank.

The government is required to keep a minimum of 51% equity in public sector banks.

Basel III is the new international regulatory framework designed to correct the deficiencies in regulation that led to the global financial crisis of 2008. It seeks higher capital adequacy ratio to meet any financial exigency.

The RBI is examining the Basel III regulations and would issue guidelines to the extent applicable for banks operating in India in due course of time.

There are 26 public sector banks, including SBI and its subsidiaries.

Source: Business Standard