Austria injects 900 mln eur in BayernLB's Hypo

* Austria injects 900 mln euros in non-voting capital

* Has option to swap into common shares at any time

* Hypo to pay 8 pct interest, repayment at 110 pct

VIENNA, Dec 23 - Austria's Hypo Group Alpe Adria, majority-owned by Germany's BayernLB, will get 900 million euros ($1.3 billion) in non-voting participation capital from the government, Austria's finance ministry said on Tuesday.

Hypo is the first non-distressed Austrian bank to receive state cash from the Alpine country's 15 billion euro fund earmarked for capital injections. Its Tier 1 capital ratio will rise to 8.4 percent in the deal, Hypo said in a statement.

The money comes on top of 700 million euros paid in by BayernLB earlier this month. The other shareholders, insurer Grawe Group and the southern Austrian state of Carinthia, did not take part in this capital hike and let their stakes dilute.

Austria's finance ministry, which had been irritated by the other shareholders' reluctance, had weighed whether to provide voting capital for Hypo to raise its influence, but in the end decided against it, sources close to the situation said.

However, under the deal with Hypo, the government can swap the non-voting capital into vote-wielding common stock at any time, the finance ministry said in a statement. Hypo will pay 8 percent interest on the capital and redeem it at 110 percent of face value, it added.

Among the reasons for sticking to non-voting capital, the main option for non-distressed banks, was the fact that its stake would have been only around 30 to 40 percent, leaving it trailing majority shareholder BayernLB.

The regulators, which also include the central bank and financial watchdog FMA, were also wary of a backlash against the Austrian banking sector because such a move could have been seen by markets as a sign that Hypo was in trouble.

Investors are closely eyeing the Austrian banking sector as Austrian banks are the biggest lenders to clients in emerging Europe, where analysts expect the economic slowdown to put financial stability at risk next year.

Hypo is particularly active in the former Yugoslavia where it has a fast-growing franchise.

Apart from Hypo and ailing municipality lender Kommunalkredit, which is being nationalised, Austrian banks have postponed until next year planned capital injections by the government.

Erste Group Bank will reconsider its request for 2.7 billion euros next year; UniCredit's Bank Austria and Raiffeisen Zentralbank will consider asking for up to 2 billion euros each, and Volksbank for 1 billion euros.

According to media reports, Cerberus Capital's BAWAG P.S.K. may ask for 300 million to 400 million euros.