Government to infuse RS. 12,517 Crore Capital in PSB's to Augment their Tier-1 Capital

Government has proposed to infuse an amount of Rs. 12,517 crore in Public Sector Banks(PSB's) to augment their Tier-1 capital in FY-2012-13. A sum of Rs. 12,000 crore was infused during 2011-12 to enable them to maintain a minimum Tier-1 CRAR of 8 per cent.

Performance of Indian banks during the year 2011-12 was conditioned to a large extent by fragile recovery of global financial markets as well as a challenging operational environment on the domestic front. The operating performance of the Scheduled Commercial Banks(SCBs) can be summed up as follows:-

- Public Sector Banks(PSB's) had a dominant share and accounted for 72 percent of the total income of the SCBs and 72.8 per cent of aggregate assets.

- In 2011-12, there was a sharp increase in the expenditure on provisioning and contingencies. As percentage of PSB assets, the provisioning expenditure increased from 1.04 per cent in 2010-11 to 1.11 per cent in 2011-12.

- PSBs were able to increase their interest spread from 2.55 per cent in 2010-11 to 2.59 per cent in 2011-12.

- Net profit as percentage of assets remained sticky at 0.98 per cent in 2010-11 and 2011-12.

- The Capital to Risk-Weighted Assets Ratio (CRAR) remained well above the RBI's stipulated 9 per cent for the system as a whole as well as for all bank groups during 2011-12, indicating that Indian banks remained well-capitalized.

- Overall NPAs of the Banking sector increased from 2.36 per cent of total credit advanced in March, 2011 to 3.57 per cent of total credit advanced in September 2012.

Source : Equity Bulls

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