Union cabinet cleared the proposal to inject Rs 12,517 crore capital into about ten state-run banks during 2012-13.
The recapitalisation will help banks maintain their Tier-I capital at a comfortable level, and hence remain compliant with the stricter capital adequacy norms under Basel-III.
Besides meeting their capital requirement, the recapitalisation would also support internationally active public sector banks (PSBs) for their national and international banking operations undertaken through their subsidiaries and associates.
Finance Minister P Chidambaram said that the exact amount — out of the Rs 12,517 crore — and mode of recapitalisation would be decided in consultation with the banks at the time of infusion.
Meanwhile, the cabinet also gave an in-principle approval for need-based additional capital infusion in PSBs from 2013-14 to 2018-19 so as to help them conform to the Basel-III capital rules.
Simply put, PSBs need not worry about capital support from the government for adhering to the Basel-III capital norms.
This could also imply that all the capital support provided by the government in the Budgets for the 2013-14 to 2018-19 can be infused in various PSBs without obtaining further cabinet nod.
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