With banks across the country being plagued with bad loans, non-performing assets, and net losses, as part of recapitalization, the Government of India has decided to infuse Rs.23.5 billion in the Central Bank of India. The capital infusion is to offer banks that have been struggling, bring about some stability, and pay interest towards Tier I (AT-1) bonds, as banks are stuck in a dilemma with regard to meeting the interest payment requirement due to their recent poor earnings.
With a number of banks across the country being put on prompt corrective action for their bad loans and net losses for consecutive financial years, banks such as Vijaya Bank, Dena Bank and Bank of Baroda are all set to merge, one that would make it the third largest bank in the country. However, before the merger, the Government of India is looking to recapitalise the aforementioned banks. The recapitalization will help banks across the country grow and meet their requirements with regard to offering interest to the Tier I (AT-1) bonds.
Source link: Business Standard