The Financial Reconstruction Commission formally decided Friday afternoon to inject 7.46 trillion yen in public funds into 15 major banks to boost their capital bases.

The money will be disbursed by the end of this month to enable the banks to write off some 9 trillion yen in bad loans for the year ending March 31.

"Internationally operating banks will basically finish writing off their nonperforming loans in fiscal 1998," said Hakuo Yanagisawa, the Cabinet minister chairing the five-member FRC. "We are convinced that the capital buildup will recover confidence here and abroad in the nation's financial system."

However, the banks may have to undergo another capital injection if borrower firms continue to fail and leave behind more irrecoverable loans during the protracted recession.

The FRC also released the 15 banks' plans to increase their outstanding loans during the following 12 months by 6.7 trillion yen, including 3 trillion yen for small and midsize firms. But some analysts doubt the plans will substantially ease the credit crunch that has driven many cash-strapped firms into bankruptcy.

In fact, the capital injection is expected to promote further consolidation in the banking industry, possibly through mergers and tieups.

The FRC will also apply pressure on Japanese banks to prevent foreign banks from gaining a dominant foothold in the domestic market, Yanagisawa said.

Now it is smaller banks' turn to have their capital bases replenished. Capital injections into these banks will depend on the results of the agency's ongoing inspections, he said. The FSA operates under the FRC.

The major banks -- which have publicly promised sweeping restructuring measures, including staff cuts totaling 20,000 by 2003 -- plan to repay the funds in five to 12 years.

The FRC's priority in monitoring the 15 is to make sure they stay profitable enough to repay the public, Yanagisawa said. The FRC will hold bank managers accountable if they fail to carry out necessary steps to protect their capital bases, he added.

The planned capital injection follows one last March in which 21 banks -- including the now-nationalized Long-Term Credit Bank of Japan and the Nippon Credit Bank -- received 1.8 trillion yen in public money.