Government to consider infusion of Rs.12000 crore into state-owned banks

The Government may soon consider a proposal for capital infusion of Rs 12,000 crore in various state-owned banks. The formal approval of the Cabinet has been sought and this may be taken up next week. Also, the DFS is seeking nod for not coming back to the Cabinet up to 2018 for all the capital infusions to be made into public sector banks (PSBs) for Basel III rules purposes. The thinking is Cabinet approval should not be necessary if bank capital infusion funds are being provided through the Union Budget. A formal approval of the Cabinet is being sought as each of the capital infusion in various PSBs will exceed the specified investment level of Rs 300 crore. The current rules require a Cabinet approval for any investment exceeding Rs 300 crore in a public sector company. The Centre had in Budget 2012-13 provided Rs 15,888 crore towards capitalisation of public sector and regional rural banks and Nabard. Of this amount, the DFS is looking to get approval for Rs 12,000 crore. The DFS has already firmed up the list of 12 banks that would get capital support. The funds are likely to be disbursed in January itself soon after Cabinet approval. Besides State Bank of India, the banks that may get the capital support include Bank of Maharashtra, United Bank of India, and Indian Overseas Bank.

Against the backdrop of its disinvestment plan, the government will soon come out with a notification allowing LIC to invest up to 30 per cent of its funds in listed as well as nonlisted companies. It is already given in the LIC Act 1959 that the LIC can invest up to 30 per cent of its total fund in a single entity. However, the Insurance Act stipulates that an insurance company can invest only 10 per cent of the fund or have 10 per cent of a company's stake, whichever is lower, in an entity. The Law Ministry, meanwhile, has already clarified that LIC Act 1959 supersedes Insurance Act 1999.

The board of Indian Overseas Bank has approved a rights issue. The bank proposes to issue 20 crore equity shares of face value Rs 10 each at a premium to be decided based on the market conditions. The bank also proposes to issue 20 crore fully convertible preference shares of face value Rs 10 each at a premium to be decided at the time of the issue. The resolution is subject to approval by RBI and other authorities. The Government's shareholding in the equity capital of the bank is at 69.62 per cent.

Source : Equity Bulls

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