The government has approved the capital infusion of Rs 11,336 crore to meet its regulatory capital requirements in five public sector banks including Punjab National Bank, Corporation Bank and Andhra Bank.
This is the first time in the current financial year that capital is being provided to government banks. According to the government’s promise, the remaining Rs 53,664 crore will be made available in the coming months of the financial year. According to sources, Punjab National Bank, the victim of the Nirav Modi scam, will get the highest amount of Rs 2,816 crore. While Allahabad Bank will get Rs 1,790 crore. Apart from this, Rs 2,019 crore to Andhra Bank, Rs 2,157 crore to Indian Overseas Bank and Rs 2,555 crore to Corporation Bank will be made available.
Sources said that there are some banks in this that have come under financial pressure due to interest payment to additional Tier-1 (AT-1) bond holders. This is the reason why they face the risk of failure to meet the regulatory capital requirements. Banks issue long-term AT-1 bonds to raise long-term capital on which attractive interest is given.
The Finance Ministry has decided to provide capital to four to five banks facing such a huge problem. In order to improve the capital base of the public sector banks facing debt trapped and increasing losses, the government had announced to provide capital of Rs 2.11 lakh crore in two years to these banks. Under this, 1.35 lakh crore rupees were to be given through recapitalization bonds to the banks and the remaining Rs 58,000 crore would be available on the market.
Of the 1.35 lakh crore rupees, the government has already made Rs 71,000 crore available through recapitalization bonds, whereas the balance will be made available in the coming months.
Apart from this, government banks are also planning to land in the capital market and are expected to raise Rs 50,000 crore from the market during the current financial year.