Funding through non-interest bearing recapitalisation bonds
The Government has infused Rs.11,500 crore into Indian Overseas Bank, Central Bank of India and UCO Bank which are under the Reserve Bank of India’s “prompt corrective action framework to improve their financial health”.
Several restrictions have been put en these banks including on lending, management compensation and directors’s fees, according to a Press Trust of India report on 31 Mar 2021.
The Central Bank of India received Rs.4,800 crore, Indian Overseas Bank Rs.4,100 crore and UCO Bank Rs.2,600 crore.
The Government has also infused Rs.3,000 crore into Bank of India out of a relief package of Rs.14,500 crore.
The capital infusion will help these banks to come out of RBI’s prompt corrective action framework.
The fund infusion has been done through non-interest bearing recapitalisation bonds with maturity varying between 31 March 2031 and 31 March 2036.
The investment in the special securities by public sector banks would not be considered as an eligible investment which is required to made in government securities in pursuance of any statutory provisions or directions applicable to the investing bank.
Most of the large state-owned lenders, including State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, and Indian Bank, have already raised money from various market sources, including share sale on a private placement basis.
The Punjab & Sind Bank was given Rs.5,500 crore in November last year.
The government had allocated Rs.20,000 crore for capital infusion into the public sector banks for meeting regulatory requirements current current financial year. #banks #investment #budget /fiinews.com
