PSU Banks Can Raise Share Capital

21 Dec,2012 15:17 IST

PSU Banks Can Raise Share Capital

Earlier ceiling of Rs 3,000 crore on share capital lifted, says FinMin

State-owned banks can now increase capital while issuing preference shares, rights issues or bonus shares without being limited by the earlier ceiling of Rs 3,000 crore, the finance ministry said on 21 December.

The restriction has been removed following passage of the Banking Laws (Amendment) Bill 2012 in Parliament. The Bill will become a law after its is signed by the President.

The ministry said the Bill will strengthen the regulatory powers of the Reserve Bank and further develop the banking sector in India.

"It will also enable the nationalised banks to raise capital by issue of preference shares or rights issue or issue of bonus shares.

"It would also enable them to increase or decrease the authorised capital with approval from the Government and RBI without being limited by the ceiling of a maximum of Rs 3,000 crore," the ministry added.

The government had to drop a controversial clause which would have allowed banks to enter into forward trading under intense opposition from different parties.

The Bill, which was passed by both the Houses of Parliament in the just concluded Winter Session, has also paved the way for new bank licences by RBI.

"This would not only help in achieving the goal of financial inclusion by providing more banking facilities but would also provide extra employment opportunities to the people at large in the banking sector," the ministry added.

Other important features of the Bill include increasing the cap on restrictions on voting rights; empowering RBI to collect information and inspect associate enterprises of banking companies; and providing for primary cooperative societies to carry on the business of banking only.

The Bill also empowers RBI to supersede the Board of Directors of banking company and appointment of administrator till alternate arrangements are made.

Further, the legislation provides for creation of a depositor education and awareness fund by utilising the inoperative deposit accounts.

After the passage of the Bill by Rajya Sabha, Finance Minister P Chidambaram had asked the RBI to speed up the process of issuance of new banking lincences. RBI has already issued the draft guidelines for that.

Over the last two decades, RBI licensed 12 banks in the private sector in two phases -- 10 in 1993 and two later.

There are 53 commercial banks in the country which include 26 public sector banks and eight foreign banks.


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