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+.