Shares of four public sector banks i.e., Indian Overseas Bank, Bank of India, Central Bank of India and UCO Bank rose up to 10 per cent on Thursday after the government infused Rs 14,500 crore in these banks to improve their financial health. Indian Overseas Bank shares gained around 10 per cent while Bank of India jumped 6.55 per cent in trade. Central Bank of India was trading 4.89 per cent higher and UCO Bank was up 4.64 per cent on the BSE.
Out of the total infusion, Rs 4,800 crore has been provided to Central Bank of India, Rs 4,100 crore to Indian Overseas Bank and Kolkata-based UCO Bank has got Rs 2,600 crore and Rs 3,000 crore has been infused into Bank of India.
The fund infusion has been done through non-interest-bearing recapitalization bonds with maturity varying between March 31, 2031 and March 31, 2036. As per the government notifications, these securities will be issued in six different maturities and will be issued at par for the amount as per the application made by the eligible banks.
Central Bank of India, Indian Overseas Bank, and UCO Bank are currently under Reserve Bank of India’s prompt corrective action (PCA) framework and the capital infusion is aimed to help these banks to come out of same.
The RBI puts banks with weak financial metrics i.e., capital ratios, asset quality and profitability under its watch under the PCA framework. The government had allocated Rs 20,000 crore for capital infusion into the public sector banks for meeting regulatory requirements for the current financial year.