Govt May Infuse Rs 11,336 Crore in 5 PSBs i.e. Allahabad Bk, Andhra Bk, Corporation Bk,Punjab National Bk and Indian Overseas Bk

Government May Infuse Rs 11,336 Crore in 5 Public Sector Banks

The government may infuse Rs 11,336 crore in five state-owned banks in a week’s time to help them make interest payments due on some bonds.

The infusion in the five lenders of which three are under the central bank’s prompt corrective action framework may be done using recapitalisation bonds.
The infusion would be part of remaining Rs 65,000 crore out of Rs 2.11 lakh crore capital infusion over two financial years. The government had announced bank recapitalisation in October last year to provide capital to public sector banks saddled with mounting bad loans.
According to the latest proposal, here’s how much each of the five banks will get:
  Allahabad Bank: Rs 1,790 crore
  Andhra Bank: Rs 2,019 crore  
  Corporation Bank: Rs 2,555 crore
  Punjab National Bank: Rs 2,816 crore 
  Indian Overseas Bank: Rs 2,157 crore
Some of these banks are under pressure to make interest payments, due in July and August, on bonds issued earlier. The amount that government infuses will ensure that they meet capital adequacy ratio of 9 percent and service their debt capital instruments.
Coupon payments of about Rs 99 crore on additional tier 1 bonds are due for Andhra Bank in August 2018, while interest liability of PNB is about Rs 135 crore this month.   Banks raise capital through AT1 bonds, which are perpetual in nature and therefore provide higher interest rates to investors.

While Allahabad Bank, Indian Overseas Bank and Corporation Bank recalled their AT1 bonds after coming under the prompt corrective action, they have to service coupon payments on upper tier 1 and upper tier 2 bonds.