Kolkata: The Reserve Bank of India (RBI) on January 10 said dilution of government holding in public sector banks (PSBs) might not be sufficient for meeting Basel III capital adequacy norms. "Recently, it has been reported that the Government of India is contemplating scaling down their holdings in PSBs to 52 per cent. This may not be sufficient to fully meet the capital needs of the PSBs under Basel III norms since the projections are based on minimum requirements", Deputy Governor R Gandhi said at a Bengal Chamber seminar here.
He said that the PSBs would have to chart out a clear capital raising plan over the next five years. "They should actively consider several options including non-voting rights share capital, differential voting rights capital and golden voting rights share capital", Gandhi said.
Approximately, a sum of Rs 4.50 lakh crore would be needed for Tier I capital, out of which Rs 2.40 lakh crore would be equity capital required by banks. He said that banks could also go for long-term bonds flotation for meeting Tier II capital requirements. Regarding NPA levels of banks, he said: "Consistently we are trying to bring in new methodologies also to deal with wilful defaulters. There will be improvements to help the banks".
He, however, said that banks would have to devise a robust risk management system to avoid such problems, adding they should also try to maintain a balanced portfolio without any over-exposure to any particular sector. Regarding merger of banks, he said these should be considered solely by them on various factors and not be imposed from outside, like the government.
"If any merger is found to be commercially viable, then it will be a strong one", Gandhi said. Stating that NBFCs should not be considered as competitors to banks, Gandhi said that these entities have a higher risk appetite than that of the banks and could apply for small finance banks licence from the regulator.
Gandhi said that PSBs were "now being increasingly enabled to compete on professional basis as they are also assured of autonomy in their commercial decision making", he said.
