The government will infuse a capital of Rs 5 billion into People’s Bank to help it meet the Central Bank’s new regulatory capital requirements.
The People’s Bank established in 1961 has over Rs 1.4 trillion in consolidated assets. Domestically it is the second largest and accounts for 15 percent of banking sector assets, advances and customer deposits with 18 million customer accounts.
Since 2008 however, the bank has received no new capital from the government while it paid an aggregate Rs 34.9 billion in dividends since 2008.
The Central Bank is expected to introduce a new set of Basel III reforms to strengthen regulation, supervision and risk of the banking sector with effect from July 7, 2017 onwards.
“The framework imposes higher capital adequacy and other more stringent risk control measures for all Banks. This has necessitated all Financial Institutions, including People’s Bank, raise their regulatory capital from current levels. In addition, the framework also imposes a Leverage Ratio requirement of 4 percent. This is to be in force and effect from January 1, 2018”, stated the cabinet paper on People’s Bank and further added,
“People’s Bank’s current regulatory capital shortfall(s) to meet the new requirements are in excess Rs 20 billion over the next three year period.The Bank is in the process of undertaking several initiatives with the objects of bridging this shortfall, in close coordination with the Ministry of Public Enterprise Development and Ministry of Finance, the new capital infusion at this juncture is requisite and necessary”.