Govt to infuse Rs 4,376 cr in BoB, Union Bank of India

The government will infuse Rs 4,376 crore as equity capital in PSU lenders Bank of Baroda and Union Bank of India as part of a recapitalisation package to shore up their equity capital.

The bank has initiated necessary steps to raise capital by offering equity shares of face value of Rs 10 each for cash at a premium of Rs 892.14, aggregating up to Rs 3,280.9 crore on preferential basis, BoB said in a statement.

The capital infusion would raise the government's holding in the bank. Currently, the government holds 53.81% in BoB.

Besides, another Mumbai-based lender Union Bank of India is expected to receive financial assistance of Rs 1,096 crore.

The bank will be issuing 3.08 crore shares at a premium of Rs 344.94 to the government on preferential basis, Union Bank of India said.

The capital infusion in both the banks have to take place before March 31 this year.

Finance Minister Pranab Mukherjee had announced capital infusion of Rs 20,157 crore into public sector banks during the current fiscal to ensure that these entities were able to attain a minimum 8 per cent Tier-I capital by March 31, 2011.

As part of recapitalisation, the government proposes to infuse Rs 6,211 crore into five banks in June 2010. The banks, which had got capital support from the government in the first tranche included Union Bank of India, Bank of Maharashtra, IDBI Bank, UCO Bank and Central Bank of India.

The proposed capital infusion is to enhance the lending capacity of the state-owned banks to meet the credit needs of the economy in order to maintain and accelerate the economic growth momentum.

Finance Minister Pranab Mukherjee in 2011-12 Budget presented last week had said, "I propose to provide a sum of Rs 6,000 crore for the year 2011-12 to enable Public Sector Banks to maintain a minimum Tier I Capital to Risk Weighted Asset Ratio (CRAR) at 8%."