The Finance Ministry has formally notified recapitalisation of State Bank of India and six other banks for 2011-12. These seven banks will get a total of Rs 12,000 crore. The Government provided Rs 6,000 crore in the Budget for 2011-12, while another Rs 6,000 crore was made available through the third supplementary demands for grants tabled in the Parliament on March 19. This additional capital will help the banks maintain a Capital to Risk Asset Ratio (CRAR) of 8 per cent.
Apart from SBI, Indian Overseas Bank, IDBI Bank, Punjab National Bank, Central Bank of India, UCO Bank and Bank of Maharashtra are the other banks which will receive money from the Government.
According to Basel-1 norms, banks should have minimum of 8 per cent of Tier-1 capital as CRAR. Tier-1 capital means mainly equity capital and disclosed reserve. A healthy CRAR shows financial soundness of the bank and It also helps in improving the competitiveness of the banks.