Friday, March 8, 2013

Union Cabinet clears Rs 12,517 cr infusion in State-run banks

The Union cabinet has approved a plan to recapitalize State-owned banks by infusing Rs 12,517 crore in them to meet their capital adequacy norms and expand lending operations.

Finance Minister P. Chidambaram said about nine to ten State-owned banks will benefit from the capital infusion programme. The amount of capital infusion and the terms and conditions would be decided after consultation with each bank, he said, adding the exercise was aimed at helping them meet stricter Basel-III norms on capital adequacy which every bank is required to meet.

The funds will be disbursed before March 2013 to the State-owned banks. The government had already earmarked the amount in the budget for the current fiscal.

The recapitalization will ensure compliance to the regulatory norms on capital adequacy and will cater to the credit needs of productive sectors of the economy as well as to withstand the impact of stress in the economy. This will also support national and international operations of the state-owned banks and will also boost the confidence of investors and market sentiments.

This additional availability of credit will cater to the credit needs of the economy and will also benefit employment oriented sectors, especially agriculture, micro & small enterprises, export, entrepreneurs in promotion of their economic activities which would, in turn, contribute substantially to the growth of the economy.

The government has already injected about Rs 32,000 crore in the banks during the previous two financial years. In FY2011-12 State-owned banks had got Rs 12,000 crore for improving their capital adequacy ratio.