The Union Government is planning to extend credit to more public sector banks in order to help them to maintain capital adequacy ratio (CAR) of 12%.

Recently government has infused capital into UCO Bank, Central Bank of India and Vijaya Bank and now the banks that are expected to get money from the government include Dena Bank, Bank of Maharashtra (BoM), Oriental Bank of Commerce (OBC) and United Bank of India (UBI).

Presently the government is evaluating the amount which each bank needs up till 2011 to maintain the CAR and after this a detailed structure would be worked out. A financial ministry official said, "We have collated information on the capital requirement of all banks for a period up to March 31, 2011. Some banks may require capital infusion if their business keeps growing at the present pace."

The government said that initially they will infuse capital only in banks that are not efficient to raise resources of its own through tier I and tier II. It will inject capital through both cash and conversion of equity into perpetual bond.

In fact banks like OBC already has a CAR that is above 12% but to help them to maintain the CAR, the government will infuse capital into such banks.

An OBC official said, "We cannot raise money through the primary market as the government shareholding is just a tad above the statutory level of 51%. Though, we have some headroom available under tier II, but the market also needs to respond. The bank may require capital infusion after six to eight months."

The government also is talking to the World Bank in order to receive financial support of nearly Rs 14,400 crore for the recapitalization of more than 12 PSU banks in the coming two years.

As on September 30th 2008, as many as 11 PSU banks had CAR below 12% and out of these 5 have been recapitalized. 3 banks including Central Bank of India, Vijaya Bank and Uco Bank received infusion of capital from government where as Corporation and Allahabad Bank used their own resources to increase their CAR above 12%.