Finance Ministry asks PSU banks to submit capital raising plans for meeting Basel-III norms

The Finance Ministry has asked all state-run lenders to submit capital raising plans following the Cabinet's approval to the reduction of government's stake in public sector banks (PSBs) to 52 per cent.

"Banks have been asked to make a detail presentation of the capital requirement over the next five years to meet Basel-III norms," sources said.

The fresh presentation would take into account latest first half year results and how much they would like to raise from the market, they said.

Accordingly, the Finance Ministry would also crystallise its view about allocation towards PSU banks during the current 2014-15 financial year, they added.

Keeping the huge capital requirement in mind, the Union Cabinet earlier in December allowed PSBs to raise up to Rs 1.60 lakh crore from markets by diluting government stake to 52 per cent in phases so as to meet the Basel-III capital adequacy norms.

The Cabinet asked the state-run lenders to broad-base retail shareholding while going in for the fund raising.

The government has already made a Budget provision of Rs 11,200 crore towards recapitalisation of state-run lenders for FY15. Besides, information has also been sought as to how much each bank would mobilise from other means, including selling of its stake in non-core business.

As part of the capital raising plan, IDBI Bank has already initiated the process of selling its entire 5 per cent stake in National Stock Exchange (NSE) that may fetch the lender about Rs 1,000 crore.

Finance Minister Arun Jaitley in the first Budget speech had said, "To be in line with Basel-III norms there is a requirement to infuse Rs 2.40 lakh crore as equity by 2018 in our banks. To meet this huge capital requirement we need to raise additional resources to fulfill this obligation."

While preserving the public ownership, the capital of these public sector lenders will be raised by increasing the shareholding of the people in a phased manner through the sale of shares, largely through retail to common citizens of this country, Jaitley had said.

Out of 27 PSU banks, the government controls 22 through majority holding. In the remaining 5 banks, the State Bank of India (SBI) holds majority stake.

Total government support provided to PSU banks towards capitalisation during the past four years was Rs 58,634 crore.