Economy

FinMin okays capital infusion of over ₹11,000 cr in five PSBs

Our Bureau New Delhi | Updated on July 17, 2018 Published on July 17, 2018

Piyush Goyal, Interim Minister for Finance. (file photo)   -  Kamal Narang

The Finance Ministry on Tuesday gave its nod for capital infusion of ₹11,336 crore in five weak public sector banks to help them tide over any situation of breach of regulatory capital requirements.

The five banks that are to get capital support under this round are Punjab National Bank (₹2,816 crore); Indian Overseas Bank (₹2,157 crore); Andhra Bank (₹2,019 crore); Corporation Bank (₹2,555 crore) and Allahabad Bank (₹1,790 crore).

These banks, including PNB, which has been hit by the ₹13,000-crore Nirav Modi scam, are facing tough times in servicing the additional Tier-I bonds, which formed part of their capital structure, it is learnt.

The latest round of capital support will come in handy for these banks to meet their obligations to investors of AT-1 bonds, which carry higher interest rates, sources said.

The government had in October last year announced ₹2.11-lakh crore capital infusion programme over two financial years.

As per the plan, the public sector banks were to get ₹1.35-lakh crore through recapitalisation bonds and ₹58,000 crore to be raised by banks from the market.

Of this ₹1.35-lakh crore, already ₹71,000 crore has been pumped into the banks through recap bonds.

The latest round of ₹11,336 crore is likely to come out of the remaining ₹65,000 crore in the ₹1.35-lakh crore window.

Public sector banks are currently reeling under the pressure of the bad-loan mess, which is estimated to be over ₹9-lakh crore.

Currently, as many as 11 of the 21 state-owned banks are under the Prompt Corrective Action (PCA) framework of the RBI.

Several of these weak banks are waiting for an opportune time to hit the market to raise capital. A majority of the 21 banks have their board approvals for the capital mop-up from the market.

Published on July 17, 2018
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