Chennai: As part of the Rs 2.11 trillion PSU banks capitalisation plan announced by the Union government last year, public sector banks are set to receive Rs 42,000 crore in capital infusion over the next four months, a senior Finance Ministry official has said.
According to media reports major lenders such as State Bank of India (SBI) and Punjab National Bank (PNB) may however be excluded from this exercise.
The development comes close on heels after the Reserve Bank of India (RBI) had partially relaxed rules relating to implementation of Basel III norms.
Now, local banks will receive an additional one year to meet the capital conservation buffer requirements, according to a decision taken at the central bank’s board meeting last week. The deadline is set on 31 March, 2020.
The rule is designed to ensure that banks build up capital buffers at times when credit is growing, which can be drawn down when losses are incurred during a stressed period.
The capital conservation buffer in the form of common equity is being uniformly phased over a period of four years, or 0.625 per cent a year, starting 1 January, 2016.
The extension of the deadline will free up capital of these banks and enable them to lend more than Rs 3.5 trillion.
“We will infuse the next tranche of recapitalisation by mid-December. Close to Rs 42,000 crore remain to be infused as capital in public sector banks in the current financial year,” the reports stated the official to have said.
Of the Rs 2.11 trillion bank recapitalisation plan, Rs 1.35 trillion was from the sale of so-called recapitalisation bonds. The remaining Rs 76,000 crore was through budgetary allocation and fundraising from the markets.