FinMin to infuse Rs 11,336 cr in PSBs

The Centre on Tuesday approved Rs 11,336 crore as capital support to five public sector banks (PSBs) to help them meet their regulatory capital requirements.

Punjab National Bank (PNB), which was recently hit by over Rs 13,000 crore scam, will get Rs 2,816 crore, while Allahabad Bank, which comes under the prompt corrective action of Reserve Bank of India (RBI) gets Rs 1,790 crore.

Andhra Bank will get Rs 2,019 crore, Indian Overseas Bank Rs 2,157 crore and Corporation Bank Rs 2,555 crore, sources in finance ministry said.

The capital infusion is a part of Rs 2.11 lakh crore bank recapitalisation plan announced last year.

Sources said that these PSU banks have to meet certain regulatory norms and were facing acute shortage of capital. Some of them had raised tier-1 capital bonds and their interest payment was due.

Basel III norms require the banks to have higher tier I capital by financial year 2019. In order to meet those norms, many public sector banks have raised capital through bonds known as AT1 bonds or additional tier 1 bonds. These have higher rates of interest than tier II bonds since they have no maturity date and can continue to be services for ever.

Last year, the government had announced Rs 2.11 lakh crore as capital infusion in PSU banks. The amount had to be paid over a period of two years. While the government promised to give Rs 1.35 lakh crore to lenders through recapitalisation bonds, the rest was to be raised by themselves through the market.

In January, the government had announced Rs 88,000 crore of capital support to 20 PSU banks for 2017-18.