By BS Reporter
The country's largest lender State Bank of India (SBI) on Monday said the government would infuse Rs 3,000 crore to it through preferential issue this fiscal.
"As of now, it will be through preferential allotment. The government has indicated about Rs 3,000 crore. It should happen by March 31," SBI Chairman Pratip Chaudhuri told reporters on Monday after meeting Finance Minister P Chidambaram and his team for pre-budget consultations.
This is part of Rs 12,000 crore infusion plan approved by the finance ministry recently. The union cabinet is likely to consider this during this week.
Last fiscal, the government had infused Rs 7,900 crore in SBI to increase the Tier-I capital of the country's largest bank. Following the capital infusion in March 2012, the government holding in SBI rose to 61.58 per cent from 59.4 per cent.
The government has been infusing funds in public sector banks in the last couple of years to strengthen their finances. It has injected about Rs 32,000 crore so far in the previous two financial years.
Chaudhuri also spoke about the widely-expected move of the Reserve Bank of India (RBI) to cut rates in its monetary review later this month,
"Cash Reserve Ratio (CRR) cut is more important and repo rate cut if it happens will be very useful. Fifty basis points repo rate cut would be useful. CRR, I would request for a 50-100 basis points cut," Chaudhuri said.
He said by these moves alone, "the rate of interest environment" can come down significantly.
RBI is scheduled to announce its third quarter monetary policy review on January 29. Since April this year, RBI has not lowered the repo rate, despite the finance ministry coming out with a five-year fiscal consolidation road map.
However, the apex bank has hinted it could go in for an interest rate cut in the fourth quarter of 2012-13.
Chaudhuri also asked the RBI to allow banks to give two per cent interest on current accounts deposits to attract cash lying in the hands of businesses.
"RBI should allow some interest. Something like two per cent to be paid on current accounts.That will encourage more people to put (money in banks) instead of keeping the money in cash. It (interest rate) will help put the money in current accounts," he said.
At present, banks do not pay any interest on money kept in current accounts.
RBI had last reduced short-term lending (repo) rate in April, 2012 and it stands at eight per cent. In October, the RBI had reduced CRR - the portion of deposits banks have to mandatorily park with the central bank- by 25 basis points to 4.25 per cent.
RBI, in its mid-quarter policy review on December 18, 2012 said: "In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards."