The ₹10,000 crore that has been allotted in the Budget for recapitalisation of banks is not enough, Pawan Bajaj, MD and CEO, United Bank of India, said here on Friday.

According to him, the Indian banking system is still under stress, especially from sectors such as steel, power, infrastructure and coal.

However, in the October-December period “some improvement” was seen in the performance of the banking sector, he said. A clear picture will emerge only after the close of this fiscal, he added.

“Estimates suggest that banks will need ₹1.3-1.5 lakh crore to meet Basel-III norms. I am not sure how banks can raise such amounts of capital,” Bajaj said during a post-Budget interactive session organised by the Calcutta Chamber of Commerce.

While Qualified Institutional Placement (QIP) was an option, the relaxation of interest payment norms on Additional Tier-I (AT1) bonds might be of some help in raising capital, he said.

Interestingly, Bajaj did not rule out the possibility of merger of weak banks in the run-up to meeting Basel-III norms.

“I think they (read government) will be looking (at) the December 2016 and March 2017 quarters before taking any decision on merger, specially the weak one,” he said.

However, Bajaj clarified that such mergers have not yet been announced.