The Finance Ministry has decided to use the preferential allotment route to pump in ₹ 6,990 crore capital into the nine identified public sector banks (PSBs). A preferential allotment of equity shares to the central government is seen as faster and efficient route to infuse capital, given that the entire process could be completed in span of fifteen days.
The Department of Financial Services (DFS) in the Finance Ministry has now asked the nine banks to take all necessary steps/approvals for the preferential allotment of equity shares to the central government, said sources in the banking industry.
The banks have also been asked to convey to the DFS the timeline, number of shares that will be issued and the price at which they would be allotted to the Central Government under this route, they added.
The choice of preferential allotment route would also mean that these nine banks will not go in for a rights issue for the capital raising.
A Rights Issue would have enabled several thousand minority shareholders to participate in the capital raising exercise.
However, the Finance Ministry has decided otherwise and proposes to infuse capital through preferential allotment of equity shares..
The DFS had few days back announced that ₹ 6,990 crore capital will be infused in nine banks.
The nine banks are State Bank of India ( ₹ 2970 crore), Bank of Baroda ( ₹ 1260 crore), Punjab National Bank (₹ 870 crore), Canara Bank (₹ 570 crore), Syndicate Bank (₹ 460 crore), Allahabad Bank (₹ 320 crore), Indian Bank (₹ 280 crore), Dena Bank (₹ 140 crore) and Andhra Bank (₹ 120 crore).
This round of capital infusion would result in Centre’s stake going up in these nine banks.
It is interesting to see that the Government will end up raising its stake in these nine PSBs when the Cabinet had recently given approval to trim down its stake in state-owned banks to 52 percent.
For instance, in Indian Bank, where the Centre’s stake is already 81.51 per cent, an additional capital infusion of ₹ 280 crore would result in centre’s shareholding going further up.
This goes contrary to SEBI’s efforts to have minimum 25 percent public shareholding in listed entities, say banking industry observers.
Srivats.kr@thehindu.co.in
.