Punjab National Bank (PNB) has restructured its share capital by returning Rs 138.33 crore to the government. The bank had received the finance ministry nod for the move last month.
The money was part of the capital PNB received from the government on January 1, 1994, against the redemption of an equivalent amount of 10-per cent recapitalisation bonds subscribed to by the bank.
PNB also paid a dividend of Rs 29.66 crore to the government from the Rs. 53.56-crore interest earned by it from investments. The bank said the government of India continues to hold 100 per cent share in the bank after the return of capital.
The restructuring was done late last month, before the bank decided to defer its initial public offer on Monday. The bank had planned its public issue to augment its net worth for meeting future capital adequacy needs. Though the deferment of the public offer may not push the bank below the minimum capital adequacy prescribed by the Reserve Bank of India, the bank will need to augment its capital in the next financial year, sources said.
This is because the risk-weighted assets of the bank are expected to increase significantly over the years. Increase in tier I capital through retained earnings alone may not be sufficient for the bank to maintain an adequate capital adequacy ratio (CAR) . Internationally, banks maintain a CAR of over 10 per cent as a banking practice, sources pointed out.
The capital adequacy position of PNB as on March 31, 1997 was 9.15 per cent, as against the RBI stipulation of 8 per cent.Earlier, in 1996-97, the bank had made a private placement of five-year unsecured redeemable bonds aggregating Rs 189.98 crore to raise long-term resources.PNBs tier I capital, as on March 31, 1997, stood at Rs 873 crore comprising capital and free reserves. The tier II capital as on that date stood at Rs 523 crore.
The tier I capital of a bank consists of equity capital, share premium and free reserves. Tier II capital comprises subordinated debt (with an initial maturity of at least five years and subject to a maximum of 50 per cent of tier I capital), revaluation reserves (to the extent of 45 per cent of the total amount of revaluation reserves on the banks books), certain general provisions and loss reserves (to the maximum of 1.25 per cent of the risk-weighted assets) and hybrid instruments.
For the purpose of calculating the total capital for capital adequacy ratio, the sum of tier I capital and tier II capital is taken, with the provision that tier II capital cannot exceed tier I capital.
As on September 30, 1997, the capital adequacy ratio of the bank, at 9.16 per cent, consisted of tier I capital of 6.46 per cent and tier II capital of 2.70 per cent.
