PSB, central bank to get more capital support
Will get major chunk of Rs15,000 cr earmarked for capital infusion into weak state-owned lenders for current fiscal
image for illustrative purpose
New Delhi: Weak public-sector lenders like Central Bank of India and Punjab & Sind Bank (PSB) will get the lion's share of the Rs15,000 crore earmarked for capital infusion in state-owned banks for the current fiscal.
It'll help these public-sector banks (PSBs) meet regulatory requirements. The capital infusion of Rs15,000 crore would go mostly to banks which had got money through non-interest-bearing bonds in the previous year as the RBI had raised some concerns on the fair valuation of these instruments, sources said. As per the RBI, the net present value of infusion made last year through zero-coupon bonds is much lower than face value as they were issued at discount, the sources added.
These special securities with tenure of 10-15 years are non-interest bearing and valued at par. Such bonds usually are non-interest bearing and issued at a deep discount to the face value. So, the effective Tier-1 capital levels for the banks could be lower than the regulatory requirement.
According to India Ratings and Research, fair valuing of the equity infused by the Government of India (GoI) in five PSBs last year through zero-coupon bonds could lower the banks' effective Tier 1 capital levels in the range of 50-175 basis points than reported.
