The Hindu Business Line : Banks would need Rs 5.68 lakh cr additional capital in next 5 years

Capital infusion
Public sector banks would require Rs 3,69,115 crore
Old private sector banks: Rs 23,319 crore
New private sector banks: Rs 1,13,180 crore
Foreign banks: Rs 63,131 crore

Our Bureau

Mumbai, Sept. 4 The banking sector would require additional capital of Rs 5,68,744 crore in the next five years.

This is based on the assumption that banks would maintain capital-to-risk-weighted assets ratio (CRAR) at 12 per cent, said the Reserve Bank of India’s Report on Currency and Finance released today.

Over the next five years public sector banks would require Rs 3,69,115 crore (64.9 per cent of total requirements), old private sector banks Rs 23,319 crore (4.1 per cent), new private sector banks Rs 1,13,180 crore (19.9 per cent) and foreign banks Rs 63,131 crore (11.1 per cent).

Since banks are maintaining Tier I capital significantly above the required level, this requirement is estimated at only Rs 2,33,564 crore during 2007-12, in which case the balance would have to come from Tier II capital, the report said.

Tier I capital requirements for the next five years were estimated at Rs 1,55,569 crore for PSU banks, Rs 8,178 crore for old private sector banks, Rs 49,278 crore for new private sector banks and Rs 20,540 crore for foreign banks.

In the case of nationalised banks, in the past five years, the increase in Tier I capital requirement was largely met by ploughing back profits, while the increase in Tier II capital was predominantly through discounted subordinated debt.

Reserves accounted for 86 per cent of the total Tier I capital in 2006-07. Therefore, it is likely that in the next five years, these banks would be able to increase their Tier I capital fund requirements largely through reserves, the report said.

Some public sector banks also have sufficient headroom available for raising equity as the Government shareholding in these banks is significantly above the minimum requirement of 51 per cent, noted the Report.

The total headroom available to nationalised banks was Rs 2,637 crore, implying that they raise equity funds to the extent of Rs 5,171 crore and still retain Government shareholding of 51 per cent.

However, only six of the 20 nationalised banks (including IDBI), have headroom of over Rs 100 crore each.

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