CHENNAI: As the March 2019 deadline to meet the capital adequacy norms under the Basel-III rules looms large, 12 out of the 21 public-sector banks have lined up to raise funds from markets to shore up their capital base. These include Punjab National Bank, Bank of India and Indian Bank.
Public-sector banks will need substantial capital to make large haircuts on loans to unviable stressed projects and to meet rising Basel III requirements. According to a report by S&P Ratings, PSBs will need at least Rs1.9 lakh crore additional capital by March 2019 to write down non-performing loans.
State Bank of India has already boosted its capital base by raising Rs 15,000 crore by selling 52.2 crore shares through qualified institutional placement (QIP).
Six to seven lenders including Andhra Bank expect to close their capital-raising plan by the end of the current fiscal.
Basel-III norms mandate banks to have at least 11.5 per cent capital adequacy ratio -- a measure of a bank’s capital, expressed as a percentage of the bank’s risk weighted credit exposures.
To help state-owned banks meet Basel-III norms, the central government has announced a roadmap called Indradhanush, which estimates that state-owned banks need to raise Rs 1.1 lakh crore from markets,
Allahabad Bank, Andhra Bank, Bank of India, Central Bank of India, Dena Bank, IDBI Bank, Indian Bank and Punjab National Bank have got permission from the government to raise capital from the market through QIP or FPO or preferential allotment.
The money banks are to raise from the markets will be over and above the Rs 70,000 crore that lenders will get as capital support from the government. Of this, the government has already infused Rs 50,000 crore in the past two fiscals and the remaining will be pumped in by the end of 2018-19.
This development comes at a time when the RBI is forcing banks to clean up their balance sheets, which are stressed of non-performing assets.