Finance Ministry to seek Cabinet nod for PSU bank recapitalisation next week.

New Delhi: The Finance Minister is likely to seek the Cabinet's nod next week to infuse Rs. 12,000 crore capital into public sector banks, including state-lender State Bank of India (SBI), for recapitalisation. There are 10 to 12 banks in the fray to receive funds from the government.

Speaking to reporters outside North Block, banking secretary, DK Mittal, told reporters: '' There is a rule that for expenditure above Rs. 300 crore, the Cabinet's approval is necessary for releasing the funds. The recapitalisation amount is around Rs. 12,000 crore, the proposal has already gone to the Cabinet. Hopefully, it should be taken up next week.''

This year's Union Budget had already allocated, over 15,000 crore for capital infusion, primarily in government-held banks and financial institutions. But, despite nod from Parliament to the Budget, this money was not released.

The government is also seeking Cabinet nod for future infusions capital surpassing Rs. 300 crore.

''We are also seeking an exemption from future Cabinet nods for Budget allocations, which have already been passed by the Parliament. The exemption will be taken till 2018, by when the BASEL- III rollout should be complete,'' Mr Mittal said.

The banking secretary also said that a final notification will soon be issued allowing Life Insurance Corporation of India (LIC) to invest up to 30 per cent of its funds in listed as well as non-listed companies. It currently has an investment limit of 10 per cent.

He said the insurance giant has run out of safe investment options as it has already invested 10 per cent in blue chip companies. ''We can't let LIC invest in C-grade stocks,'' he added.

However, regulator Insurance Regulatory and Development Authority (IRDA) has expressed strong objections to the government allowing LIC to raise its investment ceiling beyond 10 per cent. It has also cited the rule by market regulator SEBI disallowing Venture Capital Funds to invest beyond 20 per cent in a single listed entity.

The IRDA Act of 1999 limits the total investment by an insurance company in an entity to 10 per cent. However, according to the LIC Act of 1959, the life insurance giant can invest up to 30 per cent of its total fund in a single entity.

''The IRDA Act cannot supersede the LIC Act. In 1959 too, the government retained the right to decide the investment ceiling for the company. We have only reiterated our position now, after the law ministry's clearance. A fresh notification is underway explaining the position,'' Mr Mittal explained.

However, LIC will limit its exposure to stocks of listed companies to under-25 per cent; anything above that will trigger the takeover code, where the company will have to make an open offer, Mr Mittal added.


Source : profit.ndtv.com