Government has proposed to infuse an amount of Rs. 12,517 crore in Public Sector Banks(PSB’s) to augment their Tier-1 capital in FY-2012-13. A sum of Rs. 12,000 crore was infused during 2011-12 to enable them to maintain a minimum Tier-1 CRAR of 8 per cent.

Performance of Indian banks during the year 2011-12 was conditioned to a large extent by fragile recovery of global financial markets as well as a challenging operational environment on the domestic front. The operating performance of the Scheduled Commercial Banks(SCBs) can be summed up as follows:-

·         Public Sector Banks(PSB’s) had a dominant share and accounted for 72 percent of the total income of the SCBs and 72.8 per cent of aggregate assets.

·         In 2011-12, there was a sharp increase in the expenditure on provisioning and contingencies. As percentage of PSB assets, the provisioning expenditure increased from 1.04 per cent in 2010-11 to 1.11 per cent in 2011-12.

·         PSBs were able to increase their interest spread from 2.55 per cent in 2010-11 to 2.59 per cent in 2011-12.

·         Net profit as percentage of assets remained sticky at 0.98 per cent in 2010-11 and 2011-12.

·         The Capital to Risk-Weighted Assets Ratio (CRAR) remained well above the RBI’s stipulated 9 per cent for the system as a whole as well as for all bank groups during 2011-12, indicating that Indian banks remained well-capitalized.

·         Overall NPAs of the Banking sector increased from 2.36 per cent of total credit advanced in March, 2011 to 3.57 per cent of total credit advanced in September 2012.

DSM/UM/RC/RV

(Release ID :92601)

Capital infusion to augment Tier 1 capital supports public sector banks in maintaining regulatory capital adequacy. Government proposes a targeted capital infusion to bolster Tier-1 capital in public sector banks to preserve regulatory capital standards and sustain solvency amid weak global recovery and domestic operational stress. The recapitalisation responds to rising provisioning needs and increased nonperforming assets, while PSBs continue to hold a dominant share of system assets and income.