Budget 2012: Government to infuse Rs 158 bn in PSU banks

The government said it will provide capital support of Rs 15,888 crore (Rs 158.88 billion) to public sector banks and financial institutions during the next fiscal to strengthen their capital base.

"The government is committed to protect the financial health of Public Sector Banks (PSB) and financial institutions," Finance Minister Pranab Mukherjee said in the Lok Sabha while presenting Budget 2012-13.

"For the year 2012-13, I propose to provide Rs 15,888 crore for capitalisation of PSBs, Regional Rural Banks and other financial institutions, including NABARD," he said.

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The Government is also examining the possibility of creating a financial holding company which will raise resources to meet the capital requirements of PSBs.

Mukherjee said the Government had initiated the process of capitalisation of 40 financially weak RRBs, which has been completed in respect of 12 RRBs by the end of February, 2012.

"I propose to extend the scheme of capitalisation of weak RRBs by another 2 years to enable all the States to contribute their share," he said.

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Mukherjee while presenting 2011-12 Budget last year had said: "I propose to provide a sum of Rs 6,000 crore (Rs 60 billion) for the year 2011-12 to enable Public Sector Banks to maintain a minimum Tier-I Capital to Risk Weighted Asset Ratio (CRAR) at 8 per cent."

He had said the government provided Rs 20,157 crore (Rs 201.57 billion) for infusion in PSBs to maintain Tier I CRAR at 8 per cent and increase the government equity in some banks to 58 per cent in 2010-11.

On the financial inclusion, the Finance Minister said, Swabhimaan campaign was launched to extend banking facilities through Business Correspondents to habitations having population in excess of 2,000 in 2011-12.

"I am happy to announce that out of the 73,000 identified habitations that were to be covered by March, 2012, about 70,000 habitations have been provided with banking facilities," he said.

With this, over 2.55 crore beneficiary accounts would have been operationalised, he said, adding that the remaining habitations are likely to be covered by March 31 this year.

As a next step, he said, Ultra Small Branches are being set up at these habitations, where the Business Correspondents would deal with cash transactions.