Govt to infuse Rs11,336-cr capital in 5 state-run banks
18 July 2018
The government will infuse a total of Rs11,336 crore in five state-run banks, which is the last tranche of recpitalisation funds being offered under the Indradhanush scheme, which was unveiled in 2015.
The five banks are Punjab National Bank (PNB), Indian Overseas Bank (IOB), Andhra Bank, Corporation Bank & Allahabad Bank.
Of the Rs 11,336 crore, Rs2,816 crore will go to PNB, Rs2,157 to IOB, Rs2,019 crore to Andhra Bank, Rs2,555 to Corporation Bank and Rs1,790 crore to Allahabad Bank.
Allahabad Bank, Corporation Bank and Indian Overseas Bank have been placed under Reserve Bank of India’s (RBI’s) prompt corrective action (PCA) framework while Punjab National Bank and Andhra Bank with very low capital adequacy ratios and high levels of bad debt are also on the PCA border line.
For fraud-hit PNB, which had reported a record loss of more than Rs12,200 crore in 2017-18, the capital infusion is necessary to help it avoid defaulting on the interest payments due on its additional tier-1 bonds. PNB is reported to have received conditional approval from RBI to pay interest dues on its AT-1 bonds, subject to fresh capital infusion by the government. The interest payout on its Rs1,500 crore worth of bonds (8.98%) is due on 25 July, according to the report.
In October last year, the government had announced a Rs2,11,000 crore recapitalisation plan for state-run banks, partly through bond issue and issue of shares.
But, with mounting bad loans that have risen to over 10,00,000 crore and combined of around Rs63,000 crore, the Rs2,10,000 crore capitalisation plan of the government announced last year looks too inadequate.
The two-year recapitalisation programme was aimed at helping state-run banks to deal with rising bad debts and spur credit growth.