Rs.12,517 cr Capital Boost for PSBs

Will help them meet stricter capital adequacy norms under Basel- III

The Union Cabinet approved infusion of Rs 12,517 cr in about 10 public sector banks(PSBs) during the current fiscal to enhance their lending capabilities and also help them in meeting the stricter Capital Adequacy Norms under Basel- III.

This will enable the banks to maintain the Tier- I CRAR(Capital to Risk-Weighted Assets Ratio) at a comfortable level and will be compliant to stricter capital adequacy norms of Basel-III.

To keep in pace with the capital requirements in the coming years, the cabinet gave an in-principle approval for need based additional capital infusion in banks from 2013-14 to 2018-19 to ensure compliance with Basel- III global banking norms aimed at minimising financial risks.

If banks have to expand business, capital has to be infused from time to time, virtually every year for the next few years. Banks business is growing, lending is growing and lending is possible only when there is Capital Adequacy.

Since Capital could only be provided by shareholders, the government, being the major share holder in PSBs, would like to maintain its control and majority share holding in them.

Implementation of Basel III capital regulations enhances requirement of core equity capital by Banks due to higher capital ratios. The Basel III Capital Ratios will be fully phased in as on March 31, 2018.

The requirement of Core Equity will also increase due to increase in Risk Weighted Assets(RWAs) of banks under BASEL III.