PSU banks gallop as World Bank infuses fund

Ten public sector banks rose by 0.73% to 6.60% after the World Bank sanctioned $2 billion, or nearly Rs 10,000 crore, to the government to recapitalise public sector banks.
At 11:13 IST, the BSE Bankex was up 0.42% at 9,454.12. It outperformed the Sensex, which was down 0.27% at 16,840.79.
Indian Overseas Bank (up 6.60%), Vijaya Bank (up 5.31%), UCO Bank (up 5.09%), Bank of Maharashtra (up 4.49%), Syndicate Bank (up 2.90%), Andhra Bank (up 2.52%), Allahabad Bank (up 2.19%), Punjab National Bank (up 1.60%), Bank of Baroda (up 1.30%), Canara Bank (up 0.73%), spurted.
However, Bank of India (down 0.18%), Oriental Bank of Commerce (down 0.35%), and State Bank of India (down 0.66%), declined.
The World Bank on Tuesday, 22 September 2009, approved $4.3 billion in loans for India to bolster its economic stimulus programme and support the infrastructure sector. The loans are part of the World Bank's $14 billion in crisis-related lending for India over three years through 2012.
Of this $2 billion is for the banking sector, which will provide budgetary support to India, helping it maintain its broad economic stimulus program by enhancing the capital of select public sector banks.
The government had proposed Rs 18,000 crore to replenish the capital of state-owned banks during the current fiscal year in a bid to boost their balance-sheet muscle in line with international regulatory standards to help them lend more money to companies and individuals.
The funds would help these banks to shore up their capital adequacy ratio (CAR) above 12% till fiscal 2012 while helping them to adhere to the stringent Basel II norms.
The Reserve Bank of India (RBI) stipulates that banks need to maintain a capital adequacy ratio (CAR) of 9%, which includes tier I capital (equity and free reserves) and tier II capital or subordinated debt. However, the government had earlier announced that it would ensure that CAR of public sector banks did not fall below 12%.
According to reports, Bank of Maharashtra, Syndicate Bank, Indian Overseas Bank, Oriental Bank of Commerce, Andhra Bank and Vijaya Bank, have sought extra capital from the government.
Meanwhile, Bank of India, Canara Bank and Allahabad Bank have reportedly told the finance ministry that they may not require capital infusion from the government.