The Finance Ministry on Wednesday decided to pump in Rs 2,000 crore (Rs 20 billion) in State Bank of India and Rs 1,800 crore (Rs 18 billion) each in IDBI Bank and Central Bank of India as part of the Rs 14,000 crore (Rs 140 billion) capital infusion plan for the current fiscal.
"SBI is getting Rs 2,000 crore. Bigger banks are getting more," Financial Services Secretary Rajiv Takru said in New Delhi.
Besides the capital support from the government, public sector banks have the headroom to raise Rs 10,000 crore (Rs 100 billion) from the market though rights issue, Qualified Institutional Placement or follow-on public offer without diluting existing government stake.
"This money has been given to enhance equity capital not for any other purpose," he said, adding, "for the moment this is good enough to see them through."
On Tuesday, Finance Minister P Chidambaram had more than adequately made clear that the government would be allocating Rs 14,000 crore through Budget, the Financial Services Secretary said.
"Other than this, banks board could take decisions on how they want to raise additional equity.
“They have there options, they have rights issue, they have QIP option they have FPO option.
"But in any case we have made amply clear that they could proportionately tap the outside market, and increase the their equity.
“The banks would be able to generate Rs 10,000 crore (Rs 100 billion)," Takru said.
Other banks like Indian Overseas Bank would be getting Rs 1,200 crore (Rs 12 billion) while Punjab National Bank would get Rs 500 crore (Rs 5 billion).
The second round of capital infusion may come in the fourth quarter of the current fiscal depending upon banks' requirements.
"We will be giving them more after judging their performance (based on concessional lending towards home, auto and consumer durable)," Takru said.
By the end of third quarter it would be amply clear how much additional lending banks would require, he added.
Asked about QIP of SBI, Takru said: "They would be raising the funds proportionately.
“The government has 62 per cent stake so they can raise funds from the market upto 38 per cent. It could be Rs 1,500 crore (Rs 15 billion), Rs 1,600 crore (Rs 16 billion) and Rs 1,700 crore (Rs 17 billion)."
The SBI board would take a call on the QIP route.
SBI board is meeting on October 30, he added.
Later in the day, Finance Ministry in the statement said the capital infusion by the government has been done with the twin objective of adequately meeting the credit requirement of the productive sectors as well as to maintain regulatory capital adequacy ratios in public sector banks.
The government as the majority shareholder, is committed to keep all PSBs adequately capitalised, it said.
Infusion of capital by government in PSBs is in addition to their internally generated capital to enable the banks to maintain a comfortable level of Tier-I capital.
Towards this end, it said, the government has been infusing need-based capital in PSBs.
An amount of Rs 12,517 crore (Rs 125.17 billion) was infused in 13 PSBs during 2012-13.
During the current fiscal, Bank of Baroda will get Rs 550 crore (Rs 5.5 billion), Canara Bank Rs 500 crore (Rs 5 billion), Allahabad Bank Rs 400 crore (Rs 4 billion) and Dena Bank Rs 700 crore (Rs 7 billion).
Besides, Bank of India will get Rs 1,000 crore (Rs 10 billion), Corporation Bank Rs 450 crore (Rs 4.5 billion), Union Bank of India Rs 500 crore (Rs 5 billion), United Bank of India Rs 700 crore (Rs 7 billion) and Oriental Bank of Commerce Rs 150 crore (Rs 1.5 billion).