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Finance Ministry may infuse about Rs 10,000 crore in 4-5 banks

18 Jul 2018 Evaluate

In order to help the public sector banks (PSBs) to make interest payments due on some bonds, the Finance Ministry has decided to provide capital to 4-5 banks which are facing ‘acute shortage’. The Ministry may infuse about Rs 10,000 crore within a few days in some state-owned lenders including PNB, Corporation Bank and Central Bank of India. Some of these banks have come under pressure because of interest payment to their bond holders of Additional Tier 1 (AT-1) bonds. Accordingly, they are facing the risk of breaching the regulatory capital requirement.

The infusion will be part of remaining Rs 65,000 crore out of Rs 2.11 lakh crore capital infusion over two financial years. The new round of infusion will be between Rs 8,000 and Rs 10,000 crore.  In October last year, the government had announced Rs 2.11 lakh crore capital infusion programme. As per the plan, the PSBs were to get Rs 1.35 lakh crore through re-capitalisation bonds, and the balance Rs 58,000 crore through raising of capital from the market.

Out of the Rs 1.35 lakh crore, the government has already infused about Rs 71,000 crore through recap bonds in the banks and balance would be done during this fiscal. Out of 21 public sector banks, 13 have already taken the approval of their boards or shareholders for raising capital through the equity market, The combined value of the shares sales of these banks is upwards of Rs 50,000 crore. Capital is very much required for these banks as they are saddled with non-performing assets (NPAs) or bad loans of about Rs 10 lakh crore.

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