PSU banks seek govt help to meet capital needs  

MUMBAI: Many state-owned banks, anxious to maintain growth, are queuing up before the government for funds. The finance ministry has asked these banks to spell out the additional capital they would need over the next three years for maintaining a capital adequacy ratio (CAR) of 12% by fiscal 2012. 

The Reserve Bank of India (RBI) stipulates that banks need to maintain a CAR of 9%, which includes tier I capital (equity and free reserves ) and tier II capital or subordinated debt. However, the government had earlier announced that it would ensure that CAR of public sector banks did not fall below 12%.

Over the past week, senior officials of the PSU banks have had separate meetings with finance ministry officials to discuss the matter. Officials from Bank of Maharashtra, Syndicate Bank, Punjab & Sind Bank, Indian Overseas Bank, Dena Bank, Oriental Bank of Commerce, Andhra Bank and Vijaya Bank confirmed to ET that their banks have sought extra capital from the government last week..Bank of India, Canara Bank and Allahabad Bank have told the ministry that they may not require capital infusion from the government.

The government is expected to receive a $2-billion soft credit  line from the World Bank to support local banks.
“Banks have been asked to work out the kind of money they will require to maintain a 12% CAR by 2012 after factoring in credit growth and plough back of profit,” said a senior official of a large PSU bank who attended the meeting.

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