Five Public sector Banks including Punjab National Banks may get capital infusion of Rs 113 billion.
The government has decided to infuse Rs 113 billion into five public sector banks, including Punjab National Bank, to help them meet regulatory capital requirements, sources said.
The capital infusion will be a part of the Rs 2.11-trillion recapitalization plan for public sector banks announced by the government last year. It is a result of the banks’ inability to fund the interest payment to bond holders of Additional Tier 1 (AT-1) bonds, according to sources.
Why it is important?
AT-1 bonds are perpetual in nature and therefore provide higher interest rates to investors. A high-level of bad loans and widening losses have made it difficult for banks to service these bonds from their own earnings.
As a result, public sector banks were facing the risk of breaching the regulatory capital requirement.
Infusion plan boosts PSU lenders stocks’ up by 11%.
Punjab National Bank (CMP: 78.7, Market cap: Rs9134 cr , FY2020 PB: 128x)
Corporation Bank(CMP: Rs 27.5 , Market Cap : Rs 4580 cr ,FY2020 PB: 96x)
Andhra Bank (CMP: Rs 30.6, Market Cap Rs. 3674 cr , FY2020 PB:73x)
Allahabad bank (CMP: Rs 42.2 , Market cap : Rs 4314 cr, FY2020 PB:82x)