Bank of India says it can absorb mark-down of recapitalisation bonds

State-owned (BOI) has said it can absorb any burden of marking down issued in lieu of equity shares to the government without fresh capital infusion. The discounting, to be done by fair-value method, could halve the bonds’ value to about Rs 1,500 crore.

The lender’s Capital Adequacy Ratio was 16.66 with Common Equity tier I ratio of 13.16 per cent. On Monday. BOI stock closed 2.1 per cent lower at 51.4 per share on BSE.

The Reserve has expressed concern at the recapitalisation of public sector banks through zero-coupon bonds (ZCBs), raising the issue of banks’ capital adequacy falling below regulatory norms.

BOI will be able to absorb Rs 1,500 crore of discounting on bonds worth Rs 3,000 crore. Also retained profits of Financial Year 2021-22 will be more than adequate to meet regulatory norms and business growth in next year, BOI executives said.

Unlike previous years, when the government had infused capital through interest-bearing recapitalisation bonds, in FY-2021 it was done through zero-coupon bonds (ZCBs) that are redeemable at face value.

Anil Gupta, vice president, financial sector ratings at ICRA, said amongst public sector banks, Punjab & Sindh Bank (P&SB) is getting Rs 4,600 crore equity capital infusion from the government. This is perhaps to address the possibility of P&SB’s capital adequacy falling below the regulatory minimum level as are marked down.

Last week, the board of a Delhi-based public sector lender approved a plan for allotting equity shares up to Rs 4,600 crore, including share premium, to the Government of India by way of preferential issue. Its capital adequacy ratio stood at 17.82 per cent with Common Equity tier I (CET1) of 12.34 per cent at end of December 2021.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *