The government has approved releasing Rs.8,655 crore to three public sector lenders -- Allahabad Bank, Indian Overseas Bank (IOB) and UCO Bank -- for preferential allotment of shares.
The Ministry of Finance has approved infusing fresh capital amounting to Rs.2,153 crore in Allahabad Bank, Rs.2,142 crore in UCO Bank and Rs.4,630 crore in IOB via for preferential allotment of shares.
Fresh capital infusion by the government is a part of the announcement made by Finance Minister Nirmala Sitharaman, in her maiden Budget on 5 July.
Sitharaman had first proposed a capital infusion Rs.70,000 crore in public-sector banks in two phases. First, banks were to subscribe to bonds floated by the government and in the second phase, the government was to infuse the money into these banks.
As of 20 November, the government had infused Rs.60,314 crore in public-sector banks of the total of Rs.70,000 crore that was announced for these banks.
At 12.16pm, the shares of Allahabad Bank were nearly 8% up at Rs.19.15 apiece. Shares of UCO Bank were higher by 3.6% and IOB nearly 9% at Rs.17.40 and Rs.12.25 , respectively.
All these three banks are currently under the Reserve Bank of India’s prompt corrective action (PCA) framework and their ability to exit the same will be driven by a reduction in net non-performing asset ratio to less than 6.0% and maintenance of capital conservation buffer, which further depends on the capital infusion by the government.
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