Centre to provide capital support mostly to weak PSBs

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.

New 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.