Centre to restructure PSB capital to enable listing

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The government on Friday decided to restructure the capital of state owned Punjab & Sind Bank (PSB) for improving the financial health of the bank. The restructuring would enable the bank getting premium while accessing the capital market.

Under the proposal approved by the Cabinet, the capital of the bank would be restructured into ‘innovative perpetual debt instrument (Tier-I) of Rs 160 crore and ‘perpetual non-cumulative preference shares’ (Tier-II) of Rs 200 crore, while retaining Rs 183.06 crore as the equity capital of the bank. The bank has a paid up capital of Rs 743 crore at present.

“Restructuring would enable the bank to go for initial public offer...for raising additional capital from the market,”science and technology minister Kapil Sibal told reporters here.

Sibal said the enhance capital will enable the bank to expand its business in compliance with Basel II requirements (international risk norms) and thereby improve its financial position. The restructuring would substantially improve the fundamentals of the bank, including the learning per share. He said the timing of the IPO would be decided by the board of the bank.

The coupon rate on the perpetual non-cumulative preference shares may be benchmarked to RBI’s key lending rate, repo, with a spread of 100 basis points on prevailing rate. The government has given this concession keeping in view the weak financial position of the bank. The bank made profits for the last three years after years of losses.

PSB posted a net profit of Rs 382 crore during 2007-08 and has one of the lowest gross Non Performing Assets of only 0.74%. It had gross NPAs of over 9% during 2005-06, which came down below 1% in a span of two years, a bank official was quoted as saying by a news agency.

The Cabinet also approved the introduction of Workmen’s Compensation (Amendment) Bill, 2008 in Parliament for providing benefits to workers.

It has also given a green signal to the signing of a memorandum of understanding between India and Canada for cooperation in agriculture and an ex-post-facto nod to the signing of a MoU between India and Netherlands in the fields of ports and maritime transport and logistics.