(LiveMint)
The finance ministry on Tuesday approved infusion of ₹11,336 crore in five state-owned banks, including Punjab National Bank, Corporation Bank and Andhra Bank, to help them meet regulatory capital requirements, people familiar with the matter said. This is the first such capital infusion in 2018-19 and the remaining ₹53,664 crore will be disbursed during the course of the year.
Punjab National Bank (PNB), hit by the Nirav Modi scam, will receive the highest amount of ₹2,816 crore. Allahabad Bank will receive ₹1,790 crore, Andhra Bank ₹2,019 crore, Indian Overseas Bank ₹2,157 crore and Corporation Bank ₹2,555 crore. These banks are facing pressure over paying interest to the holders of their Additional Tier 1 (AT-1) bonds and are at risk of breaching regulatory capital requirements, the sources said.
Banks raise capital through AT-1 bonds, which are perpetual in nature and therefore provide higher interest rate to investors. Mounting bad loans and widening losses have made it difficult for these banks to service such bonds from their own earnings. The infusion will be part of the ₹65,000 crore remaining of a planned ₹2.11 lakh crore capital infusion programme over two fiscal years announced last October. According to the plan, public sector banks are to receive ₹1.35 lakh crore through recapitalisation bonds and will raise the balance ₹58,000 from the market.
