Only two of India's 19 nationalised banks are sufficiently capitalised

So the newly returned government is asking the World Bank for $3 billion to recapitalise 17 banks with tier 1 rations of under 14 percent.

According to a report by Financial Chronicle, only Punjab National Bank and Bank of Baroda might not need government support because of their capital adequacy ratio.

Aside from talks with the World Bank, which had committed funds to recapitalise banks in India, the ministry of finance has also started detailing the move for Minister Pranab Mukherjee.

Targeted to enable the government-owned banks to expand their credit portfolios to support industrial growth, the recapitalisation initiative also intends to insulate the banks from effects of the global financial crisis. Setting the bar higher than the normal minimum requirement of 9 percent capital adequacy, India’s former finance minister P Chidambaram had initially expressed the need for above 12 percent capital adequacy for banks to be able to take the blow.

The current government’s capital infusion will be part of its first budget slated to be presented in July 2009.