India's Finance Ministry is assessing the needs of two to three more banks after approving capital support for five public sector banks (PSBs). Fund infusion in them would be completed by the end of the second quarter of the current fiscal. The ministry has already finalised capital infusion of £ 1.13 billion in five PSBs to help them meet their interest payment commitments without impacting their regulatory capital requirements. A senior government officials said two or three more banks will need capital to meet the norms in the coming few weeks, adding that they would get funds by September.
These banks have come under pressure because of interest payment to their bond holders of Additional Tier 1 (AT-1) bonds. Which is why, they were facing the risk of breaching the regulatory capital requirement, sources said, adding that the ministry has decided to provide capital to 4-5 banks that are facing “acute shortage”. The five banks which will soon get capital include Punjab National Bank (PNB), hit by Nirav Modi scam, which will get the highest amount of £281.6 million, while Allahabad Bank will get £179 million. Besides, Andhra Bank to get £201.9 million, Indian Overseas Bank – £215.7 million and Corporation Bank – £255.5 million.
The infusion would be part of remaining £6.5 billion out of £21.1 billion capital infusion over two financial years. The official said that in the second half of the current fiscal, banks will get growth capital to enable them to expand lending activity. The government announced £21.1 billion capital infusion programme in October last year. PSBs were to get £13.5 billion as per the plan, through re-capitalisation bonds, and the balance £5.8 billion through raising of capital from the market.
Out of the £13.5 billion, the government has already infused about £7.1 billion through recap bonds in the banks and balance would be done during this fiscal. PSBs also plan to tap the markets to raise over £5 billion this fiscal to shore up their capital base for business growth and meeting regulatory global risk norms.
