The State Bank of India will be the major beneficiary of the Government's recapitalisation programme for banks.
It is expected to get Rs 8,000-8,500 crore during the current fiscal. This amount is likely to be given through various instruments such as preferential shares.
Once its capital base is augmented, SBI can go for a follow-on public offer or a rights offer. But that can be done only after this fiscal. The effort is to see that not just SBI but all the banks have 9 per cent of Tier-I capital under Basel-III norms. These norms are to be implemented between 2013 and 2019.
Supplementary demand
The Department of Financial Services (DFS) wants an additional Rs 14,000 crore for recapitalising some public sector banks. It has asked for the money in the second supplementary demand for grants.
Once approved, the public sector banks will receive a total of Rs 20,000 crore during the current financial year. The 2011-12 Budget had made a provision of Rs 6,000 crore for recapitalisation.
Mr D. K. Mittal, Secretary, Department of Financial Services, told Business Line: “The proposal has been sent. Now the Expenditure Department and the Department of Economic Affairs will see how much can be given.”
Earlier, after a meeting to discuss bank recapitalisation, Mr Mittal said that any bank with a government shareholding up to 58 per cent and less than 8 per cent Tier-I capital under CRAR (Capital to Risk Weighted Asset Ratio) will be eligible for recapitalisation. The objective is to ensure that all the 26 public sector banks have a minimum of 58 per cent government shareholding and 8 per cent capital under Tier-I by March 31, 2012.
The Government is also preparing a 10-year programme to augment the capital base of the public sector banks. The 10-year timeframe starts from the current fiscal and ends in 2021. The plan is to provide a total of Rs 4-4.25 lakh crore to all public sector banks. The Finance Ministry is likely to approach the Cabinet soon for this proposal.