State-run banks will need more capital to meet adequacy norms: RBI

New Delhi, June 26 (IANS) The Reserve Bank of India said on Friday that state-run banks are adequately capitalised, but would need additional funds to comply with international capital adequacy norms in the future.

“Right now the banks are adequately capitalised. That is right. What we are telling banks and government is that going forward, keeping in view the future growth that is likely to come in economy and also based on Basel III norms, additional capital will be needed,” RBI Deputy Governor R.Gandhi said while inaugurating a conference here on “Financial Frauds – Risks and Preventions”, organised by the Associated Chambers of Commerce and Industry of India.

“It is a continuous exercise, it is not that immediately right now today it is required, but going forward it is definitely warranted,” he said.

“It is a government’s realm, we have to pursue it, and they have to bring it to the cabinet and the parliament,” Gandhi added.

Later he told reporters that if banks are capitalised well in advance, it will give them a lot of confidence.

“Prevention is better than cure, so if banks are adequately capitalised well in advance, that gives a lot of confidence to banks.”

Finance Minister Arun Jaitley has allocated Rs.7,940 crore in the budget for recapitalisation of public sector banks in this fiscal.

The union cabinet had in December allowed state-run banks to raise up to Rs.160,000 crore from the capital markets by diluting the government stake in phases to 52 percent.

As per an estimate, public sector banks would need additional capital of up to Rs.240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.

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