Centre to inject Rs 6,211 cr into five PSU banks

The finance ministry on Saturday approved capital infusion of Rs 6,211 crore in five public sector banks — IDBI Bank,Central Bank of India,Bank of Maharashtra,Uco Bank and Union Bank. This is part of the Rs 16,500-crore bank recapitalisation plan announced by finance minister Pranab Mukherjee in Budget 2010-11 to ensure minimum 8% tier-I capital in public sector banks. Tier-I capital comprises of equity,disclosed reserves and perpetual debt. The government will infuse Rs 2,016 crore in Central Bank of India through a rights issue and Rs 3,119 crore in IDBI Bank by preferential placement of equity. It will also pump in Rs 590 crore,Rs 375 crore and Rs 111 crore in Bank of Maharashtra,Uco Bank,and the Union Bank of India,respectively,through perpetual non-cumulative preference shares route.

The infusion will help these banks attain a minimum of 8% tier-I capital by March 31,2011. The government has already infused Rs 1,500 crore in four public sector banks last month. Another Rs 1200 crore was invested in the last fiscal. “These banks would be able to leverage this capital and lend an additional approximate amount of Rs 77,637 crore to the productive sectors of the economy giving a push to all-round economic activity besides paying additional dividends and tax revenues to the government,” the finance ministry said in a statement. Government-owned banks account for more than 70% of the banking business in the country

“The government has stipulated certain conditions as part of this capital infusion and would be closely watching the performance of these banks so that they continue to maintain the desired capital adequacy and achieve those conditions,” the statement added.

Of the Rs 16,500-crore recapitalisation funds,Rs 14,500 crore is coming from the World Bank in two loans. The government is providing the remaining Rs 2,000 crore from its budgetary resources. With the infusion,IDBI Bank will see its government shareholding rising to 65% from the present 52.67%. According to IDBI Bank deputy managing director BP Singh,who also holds the additional charge of chairman,the fresh capital infusion shows the government’s commitment to ensure continuous growth of the bank. “It will help our bank to increase its tier-I capital adequacy ratio (CAR) to 8% from 6.24%.” Union Bank of India has received of Rs 111 crore only,the lowest among the six public sector banks receiving capital infusion on Saturday. Bank’s CMD MV Nair said,“We needed just Rs 111 crore only to increase our tier-I CAR to 8% from 7.91%.” Pune-based Bank of Maharashtra (BoM) had asked for Rs 1,500 crore from the Centre to meet its capital requirement for the next three years,but has received Rs 590 crore only.