INSUBCONTINENT EXCLUSIVE:
Weak public sector banks will get majority share of funds from the governmentNew Delhi: Weak public sector lenders like Central Bank of
India and Punjab - Sind Bank will get the lion's share of the Rs 15,000 crore earmarked for capital infusion in state-owned banks for the
current fiscal.This will help these public sector banks (PSBs) meet regulatory requirements.The capital infusion of Rs 15,000 crore would go
mostly to banks which had got money through non-interest-bearing bonds in the previous year as the RBI had raised some concerns on the fair
valuation of these instruments, sources said.As per the RBI, the net present value of infusion made last year through zero-coupon bonds is
much lower than face value as they were issued at discount, the sources added.These special securities with tenure of 10-15 years are
non-interest bearing and valued at par
Such bonds usually are non-interest bearing and issued at a deep discount to the face value
So, the effective tier 1 capital levels for the banks could be lower than the regulatory requirement.According to India Ratings and
Research, fair valuing of the equity infused by the government in five PSBs last year through zero-coupon bonds could lower the banks'
required level and save it from coming under the prompt corrective action (PCA) framework.Similarly, sources said, the decision for the
infusion target to Rs 15,000 crore from Rs 20,000 crore estimated earlier for 2021-22.The first capital infusion through
non-interest-bearing bonds was in Punjab - Sind Bank in the third quarter of 2020-21
It was followed by Rs 14,500 crore into four lenders - Bank of India, Indian Overseas Bank, Central Bank of India and UCO Bank in March
2021.Central Bank of India received Rs 4,800 crore, UCO Bank Rs 2,600 crore, Bank of India Rs 3,000 crore and Indian Overseas Bank Rs 4,100
