November 30, 2011

Banking Industry News for General Awareness Section of IBPS Clerical CWE 2011 : # 4

Fresh Capital to be infused in SBI to help it achieve Compliance with Capital Adequacy Ratio Norms

Union Finance Minister Pranab Mukherjee on 16 October 2011 voiced the Finance Ministry’s decision to to recapitalize State Bank of India (SBI).  Funds would be provided to the PSU lender to enable it to achieve compliance with capital adequacy ratio (CAR) norms. Fresh capital is to be infused in SBI. The government will inject Rs 3,000-4000 crore into SBI during the current fiscal 2011-12 to help it achieve an 8 per cent capital adequacy ratio (CAR).

Recapitalisation of banks is a continuing process and the government will continue to provide funds to PSU lenders through the Budget to ensure that they can meet solvency requirements.

According to estimates, SBI needs about Rs 20000 crore of fresh capital to maintain the pace of growth without sacrificing solvency margin norms.

Moody's had recently downgraded the credit rating of SBI, citing inadequate capital and poor asset quality as reasons. Following the downgrade, major private sector lenders like ICICI Bank, HDFC Bank and Axis Bank currently have a better standing than SBI in terms of their credit rating.

The government holds a 59 per cent stake in the country's largest bank, SBI.

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