Govt To Infuse Rs 3,800 Cr

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[The government will infuse Rs 3,800 crore into three state-run banks by the end of March 2010, a minister said Wednesday, helping their shares extend gains in a market that ended almost unchanged. Indian banks have been unable to raise fresh equity after the global financial crisis roiled Indian markets, but they have to adhere to the central bank's capital adequacy rules and meet rising demand for loans needed to prime the slowing economy. On Wednesday, Home Minister Palaniappan Chidambaram said the federal cabinet approved a proposal to put funds into UCO Bank, Central Bank of India and Vijaya Bank by subscribing to their shares. &quot;Today accessing the capital market is not a viable option. Capital is required. Therefore, we decided to infuse capital,&quot; Chidambaram told a news conference. UCO Bank will get 12 billion rupees -- 4.5 billion rupees in FY09 and the remaining 7.5 billion next fiscal, he said. Central Bank of India will get 7 billion rupees each this fiscal and the next, while Vijaya Bank will get 5 billion rupees in FY09 and another 7 billion rupees in FY10. The news helped shares of the three banks up by 3-5 percent. High Credit Demand Indian banks are pressed for fresh capital to comply with the central bank's norms on meeting capital to risk-weighted assets ratio (CRAR), or capital adequacy ratio, by end March. &quot;The policy is that we will recapitalise all banks to ensure all of them reach to a 12 percent CRAR,&quot; Chidambaram said. The cash-strapped government has already sought help from the World Bank to help recapitalise state-run banks. Last month, World Bank's India head had said the multilateral agency was eager to provide $3 billion in loans to help state-run banks and infrastructure firms, battling the global credit crunch. The extra funds would enable banks scale up lending to sectors such as manufacturing and infrastructure which are witnessing a sharp slowdown. Bank loans grew 22.1 percent in the year to Jan. 16, much lower than the 30 percent growth seen two years ago when the economy was growing at a scorching pace of more than 9 percent. India's GDP is seen growing 7.1 percent in the year to March. As signs of a slowdown showed in falling factory output, exports and car sales, the government urged banks to pass on the benefits of its aggressive monetary easing to borrowers by cutting lending rates and boosting loan growth. But banks are yet to match the Reserve Bank of India's 350 basis point reduction in its key lending rate since October. (Reuters)