Mumbai, Jan. 24: The Reserve Bank of India will soon announce the nature of specialised instruments, which public sector banks can use to raise capital to meet Basel-II norms by March 2007.

Commercial banks, particularly the nationalised ones, have been waiting for details from the RBI on new instruments that will qualify as Tier-I capital.

Speaking to newspersons after presenting the third-quarter review of the monetary policy today, RBI governor Y.V. Reddy said the guidelines for raising capital by banks was likely to be made public this weekend. Banks require around Rs 100,000-crore capital.

The central bank was planning to issue the guidelines today. But these were held back as some minor details are yet to be worked out, he added.

Indian banks’ appetite for capital is expected to rise significantly in the next few years to meet the huge demand for credit. Moreover, the implementation of Basel II standards is also expected to exert pressure on banks’ capital requirements.

Many nationalised banks have been considering new instruments to raise resources, as the quantum of equity capital they can raise from markets is limited. This is because the government’s shareholding is close to the threshold limit of 51 per cent. At present, the government holds between 51 per cent and 73 per cent in 10 banks.

The Bank for International Settlements (BIS) has recognised hybrid capital as a form of bank capital since 1988.