The Hindu Business Line : Chidambaram may discuss capital raising at bankers' meet

THE issue of raising additional capital for banks is expected to come up at the meeting the Finance Minister, Mr P. Chidambaram, will have with the chairmen of banks in New Delhi on November 18.

According to a senior bank official, issues such as allowing banks to raise hybrid capital, ADR, GDR and preferential shares may come up at the meeting.

Raising capital is an important issue for public sector banks, as most of them have exhausted their option to raise money from the equity market. Mr Chidambaram himself had recently said at a bankers' conference that banks need Rs 6,000 crore as capital. Therefore, there is need to explore the various options for banks to raise capital. Hybrid capital includes capital raised through instruments other than equity and bond.

Currently, the capital adequacy ratio requirement for banks is 9 per cent and with Basel II norms, it will increase to 12 per cent. With increasing credit growth, most banks will require additional funds. But public sector banks should do so while maintaining the government stake at 51 per cent.

The meeting is also expected to focus on `three Cs' — Consolidation, Convergence and Competition — as the Finance Minister recently mentioned.

A policy announcement by the government about shareholding cannot be ruled out too, said an analyst tracking the sector.

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