New Delhi: The Ministry of Finance is likely to provide capital support from the ₹Rs 20 billion fund approved by Parliament in a recently concluded session for some public sector banks (PSBs) in the third quarter.
Approved by Parliament ₹Rs 20 billion for PSB capital injection as part of the first batch of 2020-21 supplemental grant applications seeking record additional spending ₹2.35 crore lakh mainly to cover COVID-19 pandemic fighting expenses.
The infusion of funds would be to meet regulatory capital requirements should the need arise in the October-December quarter, the sources said.
The second-quarter result will give an idea of which bank may require regulatory capital and will consequently be issued recapitalization bonds, the sources said.
Additionally, state banks already have shareholder approval to raise capital through a combination of stocks and bonds during the current fiscal year.
It should be noted that the government refrained from committing capital in the 2020-21 Budget for PSBs, expecting lenders to raise funds from the market as required.
In 2019-20, the government infused ₹Rs 70 billion in PSB to boost credit for a strong boost to the economy.
In the last financial year, the National Bank of Punjab obtained ₹16,091 crore, Union Bank of India received ₹11,768 crore while Canara Bank and Indian Bank obtained ₹6,571 crore and ₹2,534 crore, respectively.
Allahabad Bank received ₹2,153 crore, United Bank of India obtained ₹Rs 1,666 crore and Andhra Bank received ₹200 crore. These three lenders have merged with several PSBs.
In addition, Bank of Baroda obtained a capital injection of ₹7,000 crore, received by the Indian Overseas Bank ₹4,360 crore and UCO Bank obtained ₹2,142 crore. Punjab & Sind Bank received ₹787 crore and the Central Bank of India obtained ₹3,353 million rupees.
In addition, IDBI Bank, controlled by LIC, received additional capital from ₹4,557 million rupees.
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