New Delhi: The Finance Ministry is going to infuse Rs 54,000 crores into public sector banks (PSBs) in the next few weeks, said sources familiar with the development. Even as these banks would be needing lesser funds following the Reserve Bank of India’s decision to defer the deadline to meet Basel III norms by a year, there is no plan on the part of the ministry to curtail capital infusion into PSBs in this financial year, sources added.
there will not be any reduction in the capital funding plan as announced in October last year despite a lower requirement due to the RBI extending the deadline for meeting the Capital Conservation Buffer (CCB) of 2.5 percent, under Basel-III norms, until March 2020
Under the new dispensation, the capital infusion by the government in PSBs for meeting the capital buffer norms would come down to around Rs 15,000-20,000 crore, sources said. However, there will not be any reduction in the capital funding plan as announced in October last year despite a lower requirement due to the RBI extending the deadline for meeting the Capital Conservation Buffer (CCB) of 2.5 percent, under Basel-III norms, until March 2020, sources said. The extension could reduce the burden of PSBs by Rs 35,000 crore this fiscal, according to rating agency Crisil.
After assessing the requirement of each bank, the ministry is expected to finalise capital infusion of about ₹54,000 crore by this month-end or by the first half of the next month.
Capital needed to fuel growth
The infusion would help improve banks’ financial health, sources said, adding that some banks would get necessary regulatory capital while others would get it for fuelling growth.
The CCB is currently at 1.875 percent and the remaining 0.625 percent was to be met by March 2019. Generally, there is a leverage of 10 times on the capital, sources said, adding that the lending capacity would increase by Rs 3.5 lakh crore.