About half-a-dozen government-owned banks such as Indian Overseas Bank, Allahabad Bank, UCO Bank, Andhra Bank, United Bank of India, and Syndicate Bank will be holding meetings of their board of directors over the next few days to consider preferential allotment of equity shares to Government of India.

The preferential allotment is aimed at augmenting the core (Tier-I) capital of these State-owned banks. Besides, it will also increase the Government's shareholding, which cannot fall below 51 per cent according to the statute, in the banks and allow them to raise additional capital from the market, in future, without depending upon the Government.

Capital infusion

The capital infusion, according to Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, will increase the lending capacity of banks. IOB has sought about Rs 1,000 crore capital infusion from the Government.

UCO Bank and United Bank of India on Wednesday informed the Bombay Stock Exchange that the Ministry of Finance, Government of India, vide its Notification dated February 15, 2011, has decided to infuse Rs 940 crore and Rs. 308 crore, respectively, by way of preferential allotment of equity in favour of the Government.

Earlier in December, the Cabinet had approved to provide an additional amount of Rs 6,000 crore, in addition to the Rs 15,000 crore already provided in the Union Budget 2010-11, to ensure Tier I CRAR (Capital to Risk Weighted Assets) of all public sector banks (PSBs) at 8 per cent and also to raise Government of India holding in all PSBs to 58 per cent.

Though the minimum regulatory requirement of CRAR for the banks is 9 per cent, the Government has mandated a total CRAR of 12 per cent, with 8 per cent as Tier-I capital. The Finance Minister, in his 2010-11 Budget speech had announced that capital would be infused in the PSBs so that they are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011.

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