Thursday, 30 June, 2022
HomeEconomyIndia set to pump Rs 13,500 crore into state banks to meet...

India set to pump Rs 13,500 crore into state banks to meet capital requirements

Text Size:

Govt ‘s infusion comes as it seeks to shore up capital buffers and help the lenders meet coupon payments on their bonds.

India will inject at least Rs 13,500 crore ($2 billion) into state-controlled banks this month, as it seeks to shore up capital buffers and help the lenders meet coupon payments on their bonds, people familiar with the matter said.

The new capital infusion will ensure the state banks have room to grow their loan books while meeting capital requirements, the people said, asking not to be named as the information isn’t public. It’s the latest step in Prime Minister Narendra Modi’s 2017 plan to add Rs 2.11 trillion of capital into the lenders over two years, the people added.

The government has been forced to inject capital because worries about bad debt and poor profitability has made it difficult for Indian banks to raise money on their own. The scope of state-controlled banks to sell shares has also been curtailed by a rule that requires the government to own at least 51 per cent of the lenders.

Punjab National Bank, which has been short of capital after being hit by a record $2 billion fraud, gets the single largest capital allocation at Rs 2,800 crore, the people said.

The new capital allocation breaks down as follows, they added:

Punjab National Bank gets Rs 2,800 crore, Corporation Bank Rs 2,500 crore, Central Bank of India Rs 2,400 crore, Indian Overseas Bank Rs 2,100 crore, Andhra Bank Rs 2,000 crore and Allahabad Bank Rs 1,700 crore.

Finance Ministry spokesman D.S. Malik didn’t immediately respond to two calls to his mobile phone.

PNB needs to pay about Rs 135 crore on 25 July to cover annual interest on Rs 150 crore worth of perpetual debt. Unless it gets fresh capital in time, it may be unable to make the payment because an unprecedented loan fraud wiped out its profits and pushed the bank’s capital below mandated levels, according to the local unit of Fitch Ratings.

Coupon payments of about Rs 99 crore are due for Andhra Bank’s so-called AT1 bonds in August, BloombergQuint reported Tuesday citing Anil Gupta, vice president of financial sector ratings at ICRA, the local unit of Moody’s Investors Service. While Allahabad Bank, Indian Overseas Bank and Corporation Bank have recalled their AT1 bonds, they have to service coupon payments on upper tier 1 and upper tier 2 bonds, according to the report. “- Bloomberg

Subscribe to our channels on YouTube & Telegram

Why news media is in crisis & How you can fix it

India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises.

But the news media is in a crisis of its own. There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.

ThePrint has the finest young reporters, columnists and editors working for it. Sustaining journalism of this quality needs smart and thinking people like you to pay for it. Whether you live in India or overseas, you can do it here.

Support Our Journalism

Most Popular