In a major step to boost the economy, the government had unraveled an Rs 2.11 lakh crore recapitalization plan for reinforcing the NPA-affected public sector banks. As per the plan, an amount of Rs 2,257 crore was infused into the State-run Bank of India. Bank of India, which stands sixth in the total number of assets held will soon join the ranks of others who have also been offered assistance from the government for increasing their capital base.
Dena Bank and Central Bank of India, two other State-run banks would be getting a capital infusion amounting to Rs 2.43 billion and Rs 3.23 billion respectively from the Central government as told on Saturday. IDBI is yet another bank who will get Rs 27.29 billion from the Centre as told to the stock exchanges in the late hours of Friday. Bank of Maharashtra and UCO Bank are also lined up in the queue for obtaining a capital infusion from the government.
Three-fourth of the capital in Bank of India is held by the Indian Government who put it under the prompt corrective action framework of the Central bank in the earlier half of this month. This, the government felt would enable the bank to tackle its twin problems of inadequate core capital and non-performing loans.
In its BSE filing on Saturday, Bank of India stated that the capital infusion it has received from the government is in the form of Common Equity Tier-1 Capital. This is held as Share Application money and after completion of due conditions and procedure for allotment, it will be allotted.
The measures undertaken by the government to pull the banks from doldrums and give a boost to economic growth take the form of budgetary support, re-capitalization bonds and equity dilution.
The RBI governor, Mr Urjit Patel lauded the government’s efforts to revive the strength of the country’s banking system.