The Finance Ministry has assured Indian Overseas Bank (IOB) of fresh capital infusion for 2011-12.
The Government has written to IOB acceding to its request for capital infusion, sources said.
IOB had sought capital support of Rs 4,016 crore from the Centre to fund its business growth for the three-year period beginning 2011-12.
Of this, the public sector lender had pegged the requirement for 2011-12 at Rs 1,400 crore. Indications are that the Finance Ministry may infuse Rs 1,400 crore into the bank to help it maintain Tier-I capital of 8 per cent by March-end 2012.
The IOB Chairman & Managing Director, Mr M. Narendra, had already ruled out any follow-on public offering (FPO) this fiscal, although enabling resolutions were in place to raise equity capital from the public.
In March last year, IOB had received capital infusion of Rs 1,054 crore. Consequent to this, the Centre's stake in the bank increased to 65.87 per cent from 61.23 per cent.
In 2010-11, the Government had provided capital support of Rs 20,157 crore to public sector banks.
For the current fiscal, the Centre has earmarked Rs 6,000 crore for capital infusion in public sector banks so that they meet regulatory requirements.
Indications are that the Government may additional amount towards bank recapitalisation in its third batch of supplementary demand for grants during the upcoming Budget session of Parliament in March.