India is preparing to infuse about 20 billion rupees ($290 million) into Punjab National Bank by next week to help it meet dues on its perpetual bonds, people familiar with the matter said. India\u2019s third-largest state-run lender will issue preferential shares to the government, the people said, asking not to be named as the information isn\u2019t public. This will help restore capital to the level needed to pay the coupon that\u2019s due July 25, they said. PNB needs to pay about 1.35 billion rupees to cover the 8.98 percent annual interest on 15 billion rupees worth of so-called AT1 bonds sold in July 2017. Unless PNB gets fresh capital in time, it may be unable to make the payment because an unprecedented loan-fraud wiped out its profits and pushed the bank\u2019s capital below mandated levels, according to the local unit of Fitch Ratings. PNB\u2019s core tier I capital was at 5.96 percent as of March 31, below the Reserve Bank of India\u2019s minimum required 7.375 percent. \u201cA plain reading of the RBI\u2019s rules could be interpreted as if the bank is below the minimum core tier I capital requirement, they would face restrictions on payment of coupon,\u201d said Prakash Agarwal, head - financial institutions, at India Ratings & Research, the local unit of Fitch. \u201cThe government is expected to step in.\u201d A spokesman for Punjab National Bank said the bank will be making the coupon payments on the due date, subject to regulatory approvals. He didn\u2019t provide any further details. Two calls made to Finance Ministry\u2019s spokesman D.S. Malik were unanswered. State-run lenders including UCO Bank, Bank of India, United Bank of India and Corporation Bank had recalled AT1 bonds earlier this year, exchange filings show. The government is recalling the bonds on concerns that loss absorption by an AT1 - by way of coupon deferral, a principal write down, or conversion into common equity - could potentially have a contagion impact on the Indian financial system and hurt stability, S&P Global Ratings said in a note in March. India Ratings had downgraded PNB\u2019s AT1 bonds in May to A+ with a negative outlook from AA+ as capital buffers deteriorated.