Bank of India may come out RBI’s PCA watch list; fund infusion plans lift stocks

New Delhi: The finance ministry has drawn up plans to pump Rs 10,086 crore into Bank of India (BoI), which will help the state-controlled bank to come out of the Reserve Bank of India’s (RBI’s) Prompt Corrective Action (PCA) watch list this fiscal. The bank’s board is likely to approve the government’s capital infusion plan this week through the preferential allotment route, BoI had said in a regulatory filing on Saturday.

As per the filing, the bank’s board will consider “by way of circular resolution on or after January 2, 2019 the proposal for raising capital by this infusion and further issue of equity shares or securities at an appropriate time and other incidental matters thereat”.

On Monday, BoI stocks hit a seven-month high of Rs 105, up 2 per cent on the BSE in early morning trade. The public sector bank’s (PSB’s) share was trading at its highest level since May 29, 2018. It may be noted that the latest capital infusion will raise the Centre’s stake in the public sector bank from its end-September level of 83.1 per cent.

Several reports suggested that North Block has decided to inject a fresh dose of capital of Rs 28,615 crore into seven public sector banks (PSBs) through recapitalisation bonds soon.

The government had announced earlier this year to inject about Rs 65,000 crore in state-run banks for the 2018-19 financial year, of which Rs 23,000 crore has already been disbursed.

Earlier this month, the finance ministry had brought in a supplementary demand for grants before Parliament for Rs 85,949 crore, including an additional Rs 41,000 crore to recapitalise weak PSBs.

It may be noted the banking regulator has barred 11 state-run weak banks from lending under the PCA plan for their deteriorating financial health until they improve their capital ratios, cut toxic loans and become profitable.

Meanwhile, the apex bank in its annual ‘Trends and Progress of Banking in 2017-18’ report, last week mentioned that the revival in credit growth in the first half of current financial year, and said, “overall improvement in the health of the banks is on the cards.”