According to the reports from the sources, it was cleared that the Indian government decided to infuse huge funds into 5 public sector banks. These banks also include Punjab national bank. The government infuses the funds for meeting the regulatory expenses.
Last year government declared the infusion of funds worth Rs 2.11 trillion. The main reason for providing such capital is the recapitalization plan for the public sector banks. The other reason for giving such infusion public sector banks are not able to pay regular interest (AT-1) to bondholders.
What is A T-1
AT-1 is the bonds which are perpetual in nature. The best things about this type of bonds are it includes higher interest rates. However, here it is somewhat different due to other operational expenses banks are not able to pay the interest to the holders of AT-1 bonds.
Statement of sources
Because of all the problems as mentioned above, may the public sector banks soon faces the risk of breaching capital requirement.
Infusion of funds
Indian government decided to infuse considerable funds in 5 public sectors banks. Details of the infusion are discussed below.
Government is infusing the amount of Rs 28.2 billion in Punjab National Bank
Infusion of Rs 25.5 billion in Corporation Bank
Infusion of Rs 21.6 billion in Indian Overseas Bank
Infusion of Rs 20.2 billion in Andhra Bank
Last, infusion of Rs 18 billion in Allahabad Bank
All the data mentioned above is recent and provided by the officials.
For the infusion of funds, government issues recapitalization bonds to all the 5 public sectors bank which was discussed above. This infusion is that part which is left out from Rs 2.11 trillion. The balance has remained from last 2 years, so the government decided to infuse all the remaining amount into banks.
The government announced an infusion of worth Rs. 2.11 trillion. It was decided last year in October. According to the government out of Rs 2.11 trillion, banks get Rs 1.35 trillion from the issues of the recapitalization bonds. Rest of the amount is infusing in banks through funds raising from the market.