PSBs likely to get Rs 20,000 crore capital infusion in FY19 if RBI retains Basel III norms

The government is planning to infuse an additional Rs 20,000 crore as a part of recapitalising the public sector banks (PSBs) in the current financial year if Reserve Bank of India (RBI) retains the current Basel III norms, sources told CNBC-TV18.

The plan to infuse the additional funds came as a buffer if RBI retains the Basel III norms at current levels.

Adopting global Basel III norms will reduce the capital requirement by one percent of the risk-weighted assets. At present, minimum common equity (CET) Tier I ratio as prescribed by RBI stands at 5.5 percent as against 4.5 percent under Basel III norms.

As of now, the Basel III norms adopted by the central bank is higher than the global benchmark.

An initial estimate presented by bankers to the government, as quoted by reports, if the RBI relaxed the norms, around Rs 6 lakh crore of lending can be achieved without any additional requirement for provisioning.

The next RBI board meeting on November 19 is likely to discuss the issues relating to Basel III norms, the sources said.

The government on October 23, had pitched to adopt the globally-practised Basel III norms to the RBI board. It's likely that the Indian banks will fully adopt the norms by March 2019.

As of March 2018, the gross non-performing asset (NPA) of all PSBs stood at 15.6 percent, the RBI had said in its financial stability report in June.