'LIC an option for PSU Banks' funding'
The public sector banks' ability to meet the growing need for funds will be inhibited, unless the government is willing to bring in more capital, says Rangarajan.
By PTI |
MUMBAI: Quasi-Government entities like LIC could be roped in to fund additional capital needs of public sector banks as they move to meet Basel II standards, Chairman of the Economic Advisory Council to the Prime Minister C Rangarajan said.
In case of Government's inability to bring in additional capital or reducing its share from 51 per cent, Rangarajan suggested funding from quasi-government entities such as the Life Insurance Corporation through an amendment in the statute.
"Government will have to bring in additional capital or reduce its share in public sector banks from 51 per cent through appropriate statutory changes," Rangarajan said, adding adoption of Basel II norms will enhance the required capital.
The public sector banks' ability to meet the growing need for funds will be inhibited, unless the government is willing to bring in more capital, he observed, adding "while there is some scope for expanding capital through various modalities, Tier I capital, that is equity, is critical."
If growth is modest, retained earnings may form an adequate source of supply, Rangarajan said, while speaking on the issue of capital adequacy in his inaugural Raj Kumar Talwar Memorial Lecture on the Indian Banking System-Challenges ahead, here recently.
In case of Government's inability to bring in additional capital or reducing its share from 51 per cent, Rangarajan suggested funding from quasi-government entities such as the Life Insurance Corporation through an amendment in the statute.
"Government will have to bring in additional capital or reduce its share in public sector banks from 51 per cent through appropriate statutory changes," Rangarajan said, adding adoption of Basel II norms will enhance the required capital.
The public sector banks' ability to meet the growing need for funds will be inhibited, unless the government is willing to bring in more capital, he observed, adding "while there is some scope for expanding capital through various modalities, Tier I capital, that is equity, is critical."
If growth is modest, retained earnings may form an adequate source of supply, Rangarajan said, while speaking on the issue of capital adequacy in his inaugural Raj Kumar Talwar Memorial Lecture on the Indian Banking System-Challenges ahead, here recently.
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