BoI may escape PCA net with Rs 10086 cr govt boost

BoI may escape PCA net with Rs 10086 cr govt boost
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Mumbai, Dec 31: The government will infuse Rs 10,086 crore into Bank of India (BoI), which will help the public sector bank (PSB) to come out of the RBI’s prompt corrective action (PCA) mechanism. The lender’s board is expected to approve the government’s capital infusion plan this week through the preferential allotment route, BoI said in a regulatory filing. The fund infusion will enhance the government’s stake in the bank from its end-September level of 83.1%.
The Rs 10,086-crore capital infusion plan for BoI makes it the second bank in the latest phase of the government’s equity enhancement exercise for PSBs, under which seven of the total 21 will be covered. United Bank of India (UBI) was the first bank to announce a similar fund infusion plan by the government.
Recently, finance minister Arun Jaitley had asked for an additional grant of Rs 41,000 crore from the Lok Sabha to enhance equity capital of PSBs. The seven PSBs together are expected to get about Rs 28,600 crore in the current round of funding from the government.
As of now, 11 PSBs are under the central bank’s PCA mechanism, which imposes lending and other restrictions. The RBI had to put these banks under such restrictions mainly due to the rising level of non-performing assets (NPAs), which made these lenders vulnerable for the system and also increased the risk for the whole economy.
According to official data, earlier in this fiscal, the government had allocated Rs 65,000 crore for infusing funds into PSBs, of which Rs 23,000 crore has already been disbursed. The Rs 41,000 crore that the FM is now asking is over and above the amount that was approved earlier.