The current level of Government shareholding in public sector banks gives it sufficient headroom for diluting its stake in many of these banks, according to the Reserve Bank of India.
The Government’s shareholding in the 21 public sector banks ranges from 55 per cent to 82 per cent.
According to the statute, the Government’s shareholding in public sector banks cannot fall below 51 per cent.
The RBI referred to the dilution of Government shareholding in the context of public sector banks requiring additional capital to implement the Basel-III capital regulation. RBI said the Basel III norms lay more focus and importance on quality, consistency and transparency of banks’ capital base.
It has estimated that the additional capital requirements of domestic banks for full Basel-III implementation till March 2018 is to the tune of Rs 4.15 lakh crore, of which equity capital will be about Rs 1.4-1.5 lakh crore while non-equity capital will be about Rs 2.65-2.75 lakh crore.
Being the majority stakeholder, the Government has been infusing capital in public sector banks. During the last five years, the Government has infused Rs 47,700 crore.
The Government has allocated Rs 14,000 crore for public sector banks. The capital infusion will ensure that banks have 8 per cent Tier-1 capital (equity capital and disclosed reserves) by the end of the current fiscal.
Banks will allot preferential shares to the Centre in lieu of the capital infusion. After capital infusion, banks will be allowed to raise Tier-1 capital from the markets in proportion to the amount infused by the Centre. This will help maintain the Centre’s level of shareholding.