‘Banks need 5L cr capital by FY18’

Govt Requires 90K Cr To Keep PSB Stakes While Meeting Basel III: RBI Guv

Mumbai: Indian banks will face an additional capital requirement of Rs 5 lakh crore by March 2018, of which Rs 3.25 lakh crore will be for non-equity capital and Rs 1.75 lakh crore for equity capital, said Reserve Bank of India governor D Subbarao on Tuesday. 

    While the capital markets are expected to be deep enough to absorb equity offerings by banks, the government would find it a challenge to come up with the Rs 90,000 crore required to retain its stake in public sector banks. 
    Divulging for the first time the cost of complying with new international norms that prescribe the minimum capital requirement for banks, Subbarao said that this raised questions on whether the market and government could provide such capital. 
    The internationally accepted capital norms, or 'Basel III' as they are called, require banks to have more capital and also exclude forms of debt that were earlier accepted as capital. 
    Delivering the inaugural address at the annual FICCIIBA banking conference in Mumbai, Subbarao said banks will have to raise between Rs 70,000 crore to Rs 1 lakh crore, depending on how much support the government will provide. 
    He said considering that banks have raised Rs 52,000 crore in the past five years, raising Rs 1 lakh crore in the next five years should not be a problem. 
    "If the government opts to maintain its shareholding at the current level, the burden of recapitalization will be of the order of Rs 90,000 crore; on the other hand, if it decides to reduce its shareholding in every bank to a minimum of 51%, the burden reduces to under Rs 70,000 crore," the RBI governor said. 
    Subbarao also warned the centre that short-cuts adopted in the past, such as recapitalizing bonds against common equity option, will militate against fiscal transparency. 
    "In the alternative, would the government be open to reducing its shareholding in PSBs to below 51%? If the government decides to pursue this option, an additional consideration is whether it will amend the statute to protect its majority voting rights?" said Subbarao.

Subbarao CRRacks a joke, bank stocks go up on news flash 
Mumbai: State Bank of India chairman Pratip Chaudhuri's attempts to stir up a debate on the applicability of cash reserve ratio (CRR) for banks took a humourous turn with RBI governor D Subbarao making light of Chaudhuri's differences with RBI. Speaking in jest, Subbarao kicked off the banking summit stating that RBI deputy governor K C Chakrabarty and Chaudhuri have been appointed members of a committee to look into the CRR issue. He added that the process would be such that both would be locked in a room until they come to a conclusion and they would submit a report only after Subbarao completes his term as RBI governor. Wire services immediately picked up the news about appointment of the committee, resulting in an uptick in bank stocks. While Chaudhuri stuck to his demand for a debate on the issue, Chakrabarty said that there can be no debate on regulatory issues. CRR refers to that portion of deposits that banks are mandated to park with RBI and on which they earn no interest. According to Chaudhuri, keeping this money idle is a drag on growth. TNN