Five public sector banks (PSBs), which are likely fall short of regulatory capital requirements, are inline to get a Rs 11,336 crore fund infusion from the government, Financial Express has reported.
Earlier, a senior Finance Ministry official was quoted to have said, “There are some banks that have issued additional tier one (AT-1) capital bonds and the interest payments are due. Now if they don’t meet the regulatory capital norms, they will not be allowed to make such payments.”
The list of banks to be infused with capital includes scam-hit Punjab National Bank (PNB). Other banks in the list are Corporation Bank, Andhra Bank, Indian Overseas Bank and Allahabad Bank.
According to the report, PNB will get Rs 2,816 crore, Corporation Bank will get Rs 2,555 crore and Andhra Bank will get Rs 2,019 crore. Indian Overseas Bank and Allahabad Bank will receive Rs 2,157 crore and Rs 1,790 crore respectively.
AT-1 bonds are issued by banks to raise capital which are long term in nature and provide higher interest rates to purchasers. High bad loans and widening losses are stated to be the causes for their inability to service these bonds.
Only five of the 15 PSBs which have declared the results for the first quarter of 2018 are closer to the minimum capital requirement, the report stated.
In January, the government had announced recapitalisation of 20 state-run banks to the tune of Rs 88,000 crore of which Rs 80,000 crore was to be raised from recapitalisation bonds.
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