Government announces Rs 14,500-crore capital infusion in 4 PSBs

Representative Image (Source: ShutterStock)

The government on March 31 announced capital infusion totalling Rs 14,500 crore in four public sector banks (PSBs) through zero-coupon bonds. With this, the government has completed capital infusion in PSBs for this fiscal.

In November last year, the government infused Rs 5,500 crore in Punjab and Sindh Bank.

These non-interest bearing bonds have been issued to the Central Bank of India, Indian Overseas Bank, Bank of India and UCO Bank. The government will infuse Rs 4,800 crore in Central Bank of India, Rs 4,100 crore in Indian Overseas Bank, Rs 3,000 crore in Bank of India and Rs 2,600 crore in UCO Bank.

These securities will be issued in six different maturities and will be issued at par for the amount as per the application made by the eligible banks, according to a government notification. The date of issue of the special securities will be the date of receipt of the subscription amount from the eligible banks, according to the notification.

The special securities shall be repayable at par on the date of maturity as indicated against each security. The special securities shall be non-interest bearing and no interest shall be payable on issue of the securities, as per the notification.

Union Finance Minister Nirmala Sitharaman on February 1 announced a capital infusion of Rs 20,000 crore in state-owned banks for the financial year 2021-2022. The public sector banks (PSBs) account for 60 percent of the assets in the Indian banking system and are under government ownership. These banks also account for about 90 percent of the stressed assets in the banking system.

Banks require capital to meet the mandatory reserve requirements laid out by the Reserve Bank of India (RBI), make provisions for bad loans and kick-start the lending cycle when demand revives in the economy.