In a step to increase the capital adequacy and improve the asset quality, the government has decided to subscribe to preferential equity shares issued by State Bank of India (SBI) and Punjab National Bank (PNB).
State Bank of India (SBI), India's premier public sector bank, said that it would receive around Rs.7,900 crore from the government through a preferential allotment of equity shares, including premium.
Punjab National Bank (PNB) would receive around Rs.1,285 crore from the government against issue of preferential equity shares of Rs.10 at a premium.
In October 2011, Moody's had downgraded SBI's standalone rating, citing inadequate capital and declining asset quality. SBI had then said it required at least Rs.8,000 crore before March, 2012, to maintain Tier-I capital adequacy ratio of 8 per cent, a level that the government seeks to maintain in state-owned banks.
In October, 2011, SBI had a Tier-1 capital adequacy ratio of 7.6 per cent.
The bank had planned a $4.5-billion rights issue earlier to boost its capital.
However, this was scrapped.
Punjab National Bank said an extraordinary general meeting of its shareholders would be held on March 20 in New Delhi to seek their approval for issuing equity shares of Rs.10 at a premium on a preferential basis in favour of the government, aggregating up to Rs.1,285 crore.
