Finance Ministry asks banks to prepare capital requirement plan

| July 22, 2012 | 0 Comments

The Finance Ministry has asked public sector banks to prepare its capital requirement plan for the current fiscal by August 15 keeping in view implementation of new global risk norms (Basel III) from January next year.

In order to finalise the additional capital allocation, the Finance Ministry will hold discussion with the management of the public sector banks between August 15-31, official sources said.

The capital requirement plan for the banks should also include, investment needs of its subsidiaries or the joint ventures.

Besides, it should take into consideration the expected recoveries from bad loans and projected net profit during 2012-13, sources said.

With the implementation of RBI capital regulation norms on Basel-III from January 1, 2013, there is a pressure on banks to have more equity capital.

It is, therefore, felt that there is an urgent need to devise a robust strategy or plan for optimal utilisation of capital available with the public sector banks, sources added.

The then Finance Minister Mr Pranab Mukherjee had said government is committed to keep all the public sector banks adequately capitalised so as to ensure that the credit needs of productive sectors of Indian economy are adequately met.

“To improve the capital adequacy of the public sector banks, I am going to provide around Rs 15,500 crore in 2012-13 because we want our banks should have adequate capital so that they can be in a position to compete with the others.

“We can fully come to expectations and reach the parameters of the Basel III norms,” he had said in April.

The government has already made provision for the capital infusion for the public sector banks in 2012-13 Budget.

In 2010-11, the government pumped in Rs 20,157 crore for infusion in public sector banks to maintain tier I capital at 8 per cent and increase the government equity in some banks to 58 per cent in 2010-11.

In the following year, public sector banks got Rs 12,000 crore for improving their capital adequacy ratio.

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