The government will infuse Rs 10,000 crore in public sector banks in order to meet their capital requirement. Public Sector Units (PSU) are lagging in interest payments to the bondholders of their Additional Tier 1 bonds. The stocks surged at 11% after this announcement.
Infusing Rs 2.11 lakh cr
The NPA of PSUs alone is at nearly Rs 8 lakh cr. So last October the Finance Minister planned to infuse Rs 2.11 lakh cr. Out of this, Rs 1.35 lakh cr was to be infused through recapitalization bonds and Rs 58,000 cr through equity market. With recapitalization begun last year, the government now focuses on Rs 65,000 cr to be infused over 2 financial years.
The Rs 10,000 cr would hence be distributed amongst 5 public sector banks- PNB, Allahabad Bank, Andhra Bank, IOB Bank, Corporation Bank. Of this, Punjab National Bank will be receiving nearly Rs 2816 cr- the highest amongst the 5 banks. The least being Allahabad bank at Rs 1790 cr approximately.
Officials regard this infusion as a necessity. There is an acute shortage of funds and a risk of breaching the capital requirement standards.
13 public sector banks had chosen to fetch capital from the market long before the proposed infusion.