Reserve Bank Deputy Governor S S Mundra today said public sector banks’ capital needs to comply with Basel-III regulations may overshoot the earlier estimate of Rs 2.4 lakh crore, and also expressed reservations about the move to infuse funds in banks selectively.

“As we move towards the Basel-III framework, may be in a year or two from now, the requirement will keep on increasing and certainly there would be enhanced capital requirement,” Mundra told presspersons on the sidelines of an event by the domestic brokerage IIFL here.

He said the RBI had earlier estimated a capital requirement of Rs 2.40 lakh crore for state-run banks which was done on a 15 per cent growth in risk weighted assets during the period till FY19, by when the migration to Basel-III has to be completed.

However, with expectations of faster growth, credit growth will come in at 16-17 per cent, higher than what was envisaged earlier, he said.

“If we are talking about growth picking up momentum and let us say even by old GDP data if growth is 6.5 per cent in FY16, that would translate into credit growth of 16-17 per cent,” he said, acknowledging that at present, banks are adequately capitalised.

The public sector banker-turned-central banker Mundra said selective allocation of capital by the government to state-run banks would only “aggravate” the problems they face.

“To my mind, at this point of time, to restrict allocation to a few banks and to leave the other banks out...time may not be very appropriate, that is what I feel.”

“To deprive them of capital at this point of time, I think, would only aggravate the problem and would also have implications on growth... Few challenges which they face at this point of time can be managed if they are able to maintain a growth momentum in the coming point of time,” he said.

Earlier this month, the Government announced an infusion Rs 6,990 crore in nine better performing banks of the total 27, which was the first tranche of the Rs 11,000-crore allocated in the Budget.

Mundra said given the higher capital requirement for the banks, the current rate of allocations by the Government may not suffice.

“Looking to the current requirement, the allocation of Rs 10,000-12,000 crore may not be good enough. It has to be much more than that,” he said, in comments that come two days ahead of the presentation of the Union Budget where the Government spells out its infusions.

He, however, did not quantify the level to which the capital requirements will grow.

The RBI has suggested three alternative mechanisms to the Government to meet the higher capital requirements, he said.

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