Finance Ministry has Planned to Discuss Capitalization of Banks and Financial Institutions

By Pradeep Yuvaraj | September 26, 2011

A recent press report said that the Finance Ministry would make discussions on the modalities and ways for the capitalization of financial institutions including banks.

The Department of Financial services have formed a committee which is expected to make a presentation of the issues involved in capitalization of financial institutions. The secretaries of the Department of Financial Ministry including revenue, expenditure and financial services would attend the meeting.

This has been resulted from the downgrading of SBI by Moody credit rating agency referring to the increasing stress on the loan portfolio and capital constraints. The Finance Minister, Mr. Pranab Mukherjee said in his statement that the Government would take decisions regarding fresh capital infusion in SBI so that the Tier I capital becomes at least 8 per cent.

The Tier I capital adequacy ratio of SBI had fallen to 7.6 per cent which resulted from the need to make provisions for pension liabilities. The instrument for capital infusion into SBI has been not yet decided by the Centre even it is said that mostly preference shares would be used. Moody had downgraded SBI from C- to D+.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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