New Delhi: The finance ministry today approved infusion of Rs 11,336 crore in five state-owned lenders including PNB, Corporation Bank and Andhra Bank to help them meet regulatory capital requirement, sources said. This is the first ever capital infusion in the current fiscal and the remaining amount of Rs 53,664 crore would be disbursed during the course of the year. As per the plan, the sources said, Punjab National Bank (PNB), hit by Nirav Modi scam, will get the highest amount of Rs 2,816 crore out, while Allahabad Bank to get Rs 1,790 crore. Besides, Andhra Bank to get Rs 2,019 crore, Indian Overseas Bank – Rs 2,157 crore and Corporation Bank – Rs 2,555 crore. These banks have come under pressure because of interest payment to their bond holders of Additional Tier 1 (AT-1) bonds, the sources said.
As a result, they were facing the risk of breaching the regulatory capital requirement, they said, adding that the ministry has decided to provide capital to 4-5 banks which are facing “acute shortage”. Banks raise capital through AT1 bonds, which are perpetual in nature and therefore provide higher interest rate to investors. A high level of bad loans and widening losses have made it difficult for banks to service these bonds from their own earnings.
The infusion would be part of remaining Rs 65,000 crore out of Rs 2.11 lakh crore capital infusion over two financial years. The government announced Rs 2.11 lakh crore capital infusion programme October last year. As per the plan, the public sector banks (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. Besides, PSBs are also planning to tap the markets to raise more than Rs 50,000 crore this fiscal to shore up their capital base for business growth and meeting regulatory global risk norms. 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.
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. Leading the pack is the Central Bank of India, which has already got shareholders’ approval for raising Rs 8,000 crore equity capital through various means, including a follow-on public offer, rights issue or a qualified institutional placement (QIP), to shore up its capital base.