Media reports suggest that the government may infuse around Rs 20,000 crore into state-run banks in 2013-14 so that they comply with the capital adequacy conditions of Basel III norms.
It is learnt that public sector banks (PSBs) have demanded the above amount for the next financial year from the government in order to comply with the provisions. However, the finance ministry would take a call on this matter after due consultation.
The government may also allow banks to raise capital through public offers as long as the former's holding is maintained at 51 percent. The Basel-III framework seeks to strengthen regulation, supervision and risk management in the banking sector.
In order to facilitate capital raising for banks, the ministry also proposes to introduce the non-operative financial holding company (NOFCH) for all PSBs.
Once set up, the NOFCH would borrow funds for bank capitalisation, reducing the need for government support. Legislative changes will need to done in various existing acts such as Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980 to set up this holding company.
The government is also working on the modalities of how the NOFCH will repay debt in the event that the bank's dividend income is found to be insufficient.