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Tuesday, June 8, 2010

Govt to pump money into 7 banks

As many as seven public sector banks may get additional capital from the government shortly, financial services secretary R Gopalan said.

“We are seeking the finance minister’s approval... five-seven banks are to be recapitalised shortly” , Mr Gopalan said.

The government plans to provide financial support of Rs 15,000 crore to public sector banks during the current fiscal. The Cabinet has already approved a capital infusion plan that will increase the lending capacity of state-run banks by Rs 1.85 lakh crore.

The exact amount, the mode of capitalisation and other terms would be decided in consultation with the banks at the time of infusion. The Rs 15,000-crore fund infusion in tier I capital instruments of PSBs would enable them to expand their credit growth by about Rs 1,85,000 crore. This additional credit availability is likely to benefit employment-oriented sectors, especially agriculture, micro and small enterprises and entrepreneurs.

Last week, the government infused Rs 1,500 crore into four public sector banks—Vijaya Bank, United Bank of India, Uco Bank and Central Bank of India—as part of their recapitalisation package. Of the total, Vijaya Bank got Rs 700 crore, Uco Bank got Rs 300 crore, Central Bank of India and United Bank of India received Rs 250 crore each.

These banks have been instructed to issue perpetual non-cumulative preference shares (PNCPS) in favour of the President, the recently listed United Bank of India had said in a statement. Accordingly, the bank has issued 25,000 PNCPS of Rs 1 lakh each on June 4 in the name of the President.

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