Press Information Bureau

Government of India

Ministry of Finance

06-December-2012 17:36 IST

The Government of India is examining the capital requirement in PSBs upto March 2018 and ways to meet the same.

The Reserve Bank of India (RBI) has informed that actual quantum of capital to be required by Indian banks will depend on numerous factors such as economic growth, growth in the Risk Weighted Assets of the banks, profitability of banks and extent of retained earnings, level of non-performing assets, growth in capital markets etc. However, the broad level estimates of RBI, based on the data obtained from banks, suggest that by March 31, 2018 the total regulatory capital requirements of Indian banks would be to the tune of Rs. 5 trillion; of which non-equity capital will be of the order of Rs. 3.25 trillion while equity capital will be of the order of Rs. 1.75 trillion. The broad level estimates also suggest that the Government’s contribution to the equity capital of the Public Sector Banks (PSBs) would be of the order of Rs. 900 billion at the existing level of shareholding of the Government in individual Public Sector Banks. These projections are based on the assumption of uniform growth in Risk Weighted Assets of 20 % per annum individually for all banks and individual bank’s assessment of internal accruals (in the range of 1.0-1.2% of Risk Weighted Assets).

This was stated by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in the Rajya Sabha today.

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DSM/RS/bs

Bank capital requirement estimates indicate substantial additional equity and non equity funding with expected government equity support. The RBI's estimates indicate a substantial increase in regulatory capital requirements for Indian banks, with a larger share expected from non equity instruments and the remainder from equity; government equity contribution to Public Sector Banks is framed at existing shareholding levels. These projections depend on assumptions of uniform growth in Risk Weighted Assets and banks' assessments of internal accruals, and are contingent on factors such as economic growth, profitability, retained earnings, and asset quality.