Two-three more PSBs may get capital infusion in a month

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New Delhi | Published: July 19, 2018 2:20:51 AM

The government has already decided to provide Rs 2,816 crore to Punjab National Bank. Corporation Bank will be provided Rs 2,555 crore, Indian Overseas Bank Rs 2,157 crore, Andhra Bank Rs 2,019 crore and Allahabad Bank Rs 1,790 crore.

After earmarking Rs 11,336 crore for five public-sector banks (PSBs), the government is planning to infuse capital into two-three more state-run lenders within a month to enable them to meet regulatory requirement.

After earmarking Rs 11,336 crore for five public-sector banks (PSBs), the government is planning to infuse capital into two-three more state-run lenders within a month to enable them to meet regulatory requirement.

Growth capital will be provided to PSBs that meet performance targets set for them, said a senior government official. For others, the capital infusion will be limited to meeting their regulatory requirements. This means relatively strong banks will get capital to improve lending and help spur economic growth, while small and weak ones will have to be content with bare minimum capital required to avoid drastic regulatory action. The infusion will be in the form of recapitalisation bonds. The official, however, didn’t share details of the banks that will be offered the capital in the next one month, over and above the funds earmarked to five PSBs.

The government has already decided to provide Rs 2,816 crore to Punjab National Bank (PNB), which was hit by an over $2-billion fraud caused by jewellers Nirav Modi and Mehul Choksi. Corporation Bank will be provided Rs 2,555 crore, Indian Overseas Bank Rs 2,157 crore, Andhra Bank Rs 2,019 crore and Allahabad Bank Rs 1,790 crore.

The infusion is part of Rs 65,000 crore allocated for this fiscal, out of a Rs 2.11 lakh crore capital infusion over two financial years, announced in October 2017.

Some of these banks had sought capital urgently, as they are facing pressure due to interest payment to holders of their Additional Tier 1 (AT-1) bonds. Consequently, they were facing the risk of breaching the regulatory capital requirement. Three of these banks — Corporation Bank, IOB and Allahabad Bank — are already under the central bank’s prompt corrective action framework.

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