The government will pump in Rs five,000 crore—the remaining capital infusion quantity for the existing fiscal year—in Bank of Baroda ahead of its merger with Vijaya Bank and Dena Bank, according to a senior official.
The government had on Feb. 20 infused Rs 48,239 crore in 12 public sector banks but skipped Bank of Baroda. Although announcing the recapitalisation of public sector banks, Economic Solutions Secretary Rajiv Kumar had stated that the pending Rs five,000 crore could be employed for any contingency or for development capital in banks like amalgamated entity of Bank of Baroda.
Rating agency ICRA Ltd. anticipated the merged entity to acquire Rs five,500-six,000 crore from the government. “The capital infusion is largely in line with the estimates for economic year 2018-19 as we anticipate the merged entity will need to have more capital on getting classified as Domestic-Systemically Crucial Bank (D-SIB),” Anil Gupta, vice president at ICRA told BloombergQuint.
Classification of the merged entity as a D-SIB would imply an more capital requirement for the lender, Gupta stated.
With this, the government has spent the total quantity of Rs 1.06 lakh crore set aside for capital infusion in public sector banks for the existing economic year.
The government had earlier announced an infusion of Rs 65,000 crore in PSBs in 2018-19, and the government had sought Parliament’s approval in December to infuse an more Rs 41,000 crore in state-owned banks.