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Eight PSU Banks To Raise Capital From Market By March

As many as eight public sector banks have decided to raise capital from the market within four months.

A vendor arranges his clothing stall below a sign for the Bank of Baroda in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
A vendor arranges his clothing stall below a sign for the Bank of Baroda in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

As many as eight public sector banks have decided to raise capital from the market within four months as part of the Rs 2.11 lakh crore recapitalisation plan, according to officials.

Some banks have already got approval from the finance ministry, while others are in the process of getting the green signal for raising capital either through private placement or the rights issue, they said.

Most banks are preferring the qualified institutional placement route, officials privy to the development said, adding that Punjab National Bank would be the first to hit the market to raise Rs 5,000 crore.

Bank of Baroda, Bank of India, Union Bank of India Allahabad Bank and Andhra Bank are also gearing up for the share sale, they said.

Finance Minister Arun Jaitley in October had announced an unprecedented Rs 2.11 lakh crore two-year road map to strengthen public sector banks, reeling under high non-performing assets or bad loans. Their NPAs have increased to Rs 7.33 lakh crore as of June 2017, from Rs 2.75 lakh crore in March 2015.

The plan includes floating re-capitalisation bonds of Rs 1.35 lakh crore and raising Rs 58,000 crore from the market by diluting government’s stake.

The government equity, as per the current policy, can come down to 52 percent in state-owned banks.

Jaitley had also announced that banks would get about Rs 18,000 crore under the Indradhanush plan over the next two years.

Under the Indradhanush road map announced in 2015, the government had announced infusion of Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the market to meet their capital requirement in line with global risk norms, known as Basel-III.

In the last three-and-a-half years, the government pumped in Rs 51,858 crore capital in the PSBs. The remaining Rs 18,142 crore will be injected into the banks over the next two years.