On March 31 the government made an official statement to induce a total amount of Rs 14,500 crore. The amount will divide and invested in four public sector banks through zero-coupon bonds.
The investment amount is Rs 4,800 crore in the Central Bank of India. Then, Rs 3,000 crore investment in Bank of India, Rs 4,100 crore in Indian Overseas Bank. Lastly, the remaining Rs 2,600 crore will fund by UCO Bank.
Earlier, in 2020 the government injected a total of Rs 5,500 crore in Punjab and Sindh Bank
The motive to infuse funds in the banks was to improve the financial health of the PSU banks. These banks were under the central bank’s prompt corrective action (PCA). It is a framework wherein the banks with weak financial stability and health are observed by RBI.
The securities issuance will be at par for six different maturities. The eligible banks can apply for the issuance. The date of receipt is going to be the date of issue of special securities
The infusion of the capital amount is arranged through non-interest-bearing recapitalization bonds. Additionally, this is beneficial for the government is it saves interest costs. Also, in February the finance minister announced to induce a total amount of Rs 20,000 crore in the PSU banks for the financial year 21-22.
Hence, for stability and good financial health, the banks need to follow the regulations formulated by RBI. Which includes, make and arranging for bad loans that provision. Also, to engage in lending activities to maintain the cash flow requirements in demand. This helps in maintaining a regular flow of cash in and out in the economy.
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