Capital infusion into PSBs: Preparatory work for privatisation starts

Buoyant market may gradually reduce PSBs' dependence on government for funds

Stocks of Central Bank of India, Indian Overseas Bank (IOB), Bank of India (BOI), and UCO Bank gained 3-6 per cent in Thursday’s trade, reacting to the government’s Rs 14,500-crore capital infusion proposal as this could help them exit the prompt corrective action (PCA) framework. This money, received by the banks on Wednesday, is through zero-coupon bonds (ZCBs).

Interestingly, in the case of Bank of Maharashtra, when the government infused Rs 5,500 crore of capital as ZCBs, media reports suggested that the Reserve Bank of India (RBI) wasn’t comfortable with this approach of funding, considering the nature of the instrument used.