Government To Issue Recap Bonds Of Six Maturities
Government to issue six different securities under its recapitalisation bond plan.
The government will issue recapitalisation bonds with six different maturities and coupon rates for infusing capital in public sector banks.
These bonds will have a coupon of:
- 7.35 percent maturing in 2028.
- 7.42 percent maturing in 2029.
- 7.48 per cent maturing in 2030.
- 7.55 per cent maturing in 2031.
- 7.61 percent maturing in 2032.
- 7.68 percent maturing in 2033.
A total of Rs 80,000 crore would be infused in state-owned banks through the bonds this year, said a gazette notification by the Ministry of Finance on Tuesday. They will have to be held till maturity, and will not get the status of statutory liquidity ratio, or the minimum sovereign bonds that banks have to subscribe.
They can be part of the ‘held to maturity category’ of investments by public sector banks without any limits, the government said. Such securities can’t be traded.
State Bank of India will get Rs 1,470 crore from recapitalisation bonds maturing in 2028 and having a coupon of 7.35 percent; and Rs 1,466 crore each from bonds maturing in 2029, 2030, 2031, 2032 and 2033 with different coupon rates.
The total infusion in the bank through recapitalisation bonds is Rs 8,800 crore. Since the government recently announced it would infuse Rs 8,800 in SBI this year, the country’s largest lender will not get funds through budgetary support.
IDBI Bank is set to get Rs 7,881 crore through recapitalisation bonds, Bank of India will get Rs 6,975 crore and Punjab and Sind Bank will get Rs 785 crore.
The government last week announced that it will infuse Rs 88,139 crore into public sector banks by March 31 through a mix of budgetary allocation worth Rs 8,139 crore and recapitalisation bonds worth Rs 80,000 crore.
Of this, eleven public sector banks—with high bad loans and weak capital adequacy levels—under the prompt corrective action framework of the Reserve Bank of India are set to receive Rs 52,311 crore. The other state-owned banks will receive Rs 35,828 crore.
The recapitalisation programme was announced with riders. Some of the conditions for banks under the prompt corrective action include reducing their corporate loan book, increasing access to credit for small and medium enterprises and shutting down international branches. Other conditions include a minimum 10 percent contribution in every consortium lending arrangement, special monitoring of loans above Rs 250 crore and a separate stressed asset vertical for quick recovery.