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India Allows 7 PSU Banks To Raise Capital From Market

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India has allowed seven state-run banks to raise capital from market as part of efforts to help them comply with global Basel III banking rules, a finance ministry statement said on Wednesday (11 March).

The government in its budget for the next fiscal year that starts from April 1 has allocated Rs 7,940 crore ($1.26 billion) for capital infusion in state-banks, far lower than what the market had expected.

The statement, issued after government officials' meeting with the chiefs of state-run banks, did not name the lenders allowed to sell shares or mention any timeframe for such sales.

Top lender State Bank of India and at least two other state-owned lenders - Punjab National Bank and Canara Bank - have plans to raise funds through share sales.

Meanwhile, promising financial autonomy to PSU banks, Finance Minister Arun Jaitley has asked heads of public sector lenders to take commercial decisions without fear or favour.

At the same time, he advised banks to facilitate appropriate credit expansion to meet the needs of the productive sectors of the economy so that the momentum of economic growth is sustained.

"CEOs of the banks and financial institutions (should) take commercial decisions without fear or favour as the government is committed to providing them financial autonomy both in letter and spirit," Jaitley said.

The minister was speaking at a meeting to review the quarterly performance of the public sector banks (PSBs) and financial institutions (FIs) here.

He insisted that the banks should have strong public grievances redressal mechanism in place so that their clients do not have to approach the government to redress their grievances.

The banks, he said, should adopt differentiated strategies and capital augmentation plans through innovative financial instruments, which would allow the banks to meet their capital requirements.

Appreciating the work done by banks in Pradhan Matri Jan Dhan Yojana (PMJDY), the Finance Minister said achieving near total financial inclusion in a short period of time has shown that the banking system is capable of delivering the desired output when our energies are focused on the priority area.

Jaitley also mentioned about the specific budget announcements made while delivering his Budget Speech 2015-16 to introduce Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana.

He said he expected that PSBs would play an active role in successful implementation of these schemes.

(Agencies)