RBI expresses concern over PSU banks’ deteriorating capital positions

RBI expresses concern over PSU banks’ deteriorating capital positionsThe Reserve Bank of India (RBI) on Thursday expressed its concern over the worsening capital positions of government-run banks.

In its annual 'Trends & progress of banking in 2012-13' report, the RBI said that public sector banks' CRAR (capital to risk-weighted assets ratio) under Basel I and II stood at 11.31 per cent and 12.38 per, respectively, at the end of March 2013.

The banks' CRARs under Basel I and II were thus well above the stipulated 9 per cent norm.

Commenting on the high CRARs, the central bank said, "Deteriorating capital positions of public sector banks is a matter of concern given the fiscal implications of capital infusion in these banks."

However, the central bank also noted that the CRAR figures showed a declining trend. PSU banks' CRAR under Basel I was recorded at 11.88 per cent in the previous year.

Private sector banks' CRAR was recorded at 15.10 per cent and 16.84 per cent under Basel I and II, respectively, at the end of March this year.

The RBI stressed that as the bank move from current Basel II to Basel III framework, they required to improve the quantity as well as quality of capital while meeting the economy's soaring demand for credit.