PSU banks stock down after Budget announcement

Mumbai: Shares of public sector banks declined by as much as 4.3 per cent after Finance Minister Arun Jaitley on July 10 said the lenders would require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms.

SBI was trading 2 per cent lower, while Indian Bank dropped 4.31 per cent on the BSE. Similarly, Oriental Bank of Commerce was down 3.66 per cent, Andhra Bank tanked 3.57 per cent, Indian Overseas Bank (3.49 per cent), Bank of India (3.19 per cent), Allahabad Bank (2.53 per cent), Union Bank of India (2.50 per cent) State Bank of Bikaner and Jaipur (1.49 per cent), United Bank of India (1.34 per cent) and Bank of Baroda (1.13 per cent).

Proposing to provide greater autonomy to public sector banks, Finance Minister Arun Jaitley today said these lenders would require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms. "To be in line with the Basel III norms, there is requirement to infuse Rs 2.40 lakh crore as equity by 2018 in our banks (public sector banks). To meet this huge capital requirement, we need to raise additional resources to fill this obligation," he said in the Budget speech in Parliament.

A large part of this fund would be raised through public offers made to retail customers, he said. "While preserving the public ownership, the capital of these banks would be raised by increasing the shareholding of capital in the phased manner through sale of shares largely through retail common citizen in the country," he said.

"Thus, while the government would continue to hold majority shareholding, the citizen of India will also get direct shareholding in the bank which they currently hold indirectly," he added. Presently, there are 27 public sector banks, including SBI and its subsidiaries.