New Delhi : Reserve Bank of India Deputy Governor R Gandhi said public sector banks need higher capitalisation than budgeted to strengthen balance sheet and dealing with NPAs, reports PTI.
“Need higher capitalisation in PSU banks for balance sheet growth, dealing with NPAs. Need capital infusion for three things — to meet Basel III, better provisioning and improving banks business,” he said. FPOs (follow on public offer) and capital infusion by government are two ways to raise capital, he added.
For the current fiscal, the government has allocated Rs 7,940 crore in the Budget for capital infusion in state-owned banks but the government has pledged to provide more in the ongoing fiscal.
According to an estimate, public sector banks would need an additional capital of Rs 2.40 lakh crore by 2018 to meet the Basel III capital adequacy norms. Keeping the huge capital requirements in mind, Cabinet in December 2014 had allowed public sector banks to raise up to Rs 1.60 lakh crore from markets by diluting government holding to 52% in phases.
Meanwhile, Reserve Bank of India Deputy Governor H.R. Khan said the central Bank is in talks with the government on resetting the foreign institutional investment limit in government bonds in rupee terms.
On Jun 26, Finance Secretary Rajiv Mehrishi had said the finance ministry was in favour of setting the limit for foreign investment in government bonds in rupee terms, rather than the current practice of specifying those in dollars.
At present, foreign investment in government debt is capped at $30 bln, of which $5 bln is reserved for long-term investors.
