The Government of India has reportedly approved a new capital infusion of INR113.36bn ($1.65bn) into five state-owned banks to help them fulfil regulatory requirements.
According to local media reports, the Punjab National Bank (PNB), which was affected by the largest banking scam last fiscal, will receive the largest share of the capital at INR28.16bn.
It will be followed by Corporation Bank and Indian Overseas Bank with INR25.55bn and INR21.57bn, respectively.
Allahabad Bank will receive INR17.9bn and Andhra Bank will receive INR20.19bn.
The government was forced to infuse fresh capital as these five state-run lenders were struggling to pay interest payment to their Additional Tier 1 (AT-1) bond holders.
Increasing bad loans and losses incurred in the last fiscal affected the banks’ ability to pay the interests from their own revenues.
This new infusion is part of the remaining INR650bn out of INR2.11tn capital infusion plan announced in October last year.
Apart from the government-supported infusion, the state-run lenders are also planning to raise capital from the equity market. Thirteen out of 21 public sector banks have already secured board and shareholder approval for the same.