NEW DELHI: The Bank of Baroda, which will be merged with Dena Bank and Vijaya Bank, is likely to get Rs 5,000 crore capital infusion from the government this week.
The capital will be assigned from the budgetary allocation that the government has already done. “The government had already announced to support Bank of Baroda ahead of the merger. So, this week, it will infuse Rs 5,000 crore out of the budgetary allocation,” a senior official from the Department of Financial Services told TNIE.
After the infusion, the government will meet the recapitalisation targets it had set for this financial year. So
far, it has pumped Rs 1.90 lakh crore into PSBs after announcing the recapitalisation plan in October 2017.
While the government had earlier announced an infusion of Rs 65,000 crore in PSBs for the financial year 2018-19, it had sought Parliament’s approval in December to infuse an additional Rs 41,000 crore in state-owned banks. On February 20, the government had infused Rs 48,239 crore in 12 public sector banks but it had skipped Bank of Baroda.
Financial Service Secretary Rajiv Kumar had specified that the pending Rs 5,000 crore may be used for any contingency or for growth capital in banks, including amalgamated entity of Bank of Baroda if it requires.
As per the officials, the fresh infusion will help in absorbing the Non-Performing Asset (NPA) of Dena Bank. The merger will create India’s third-largest bank with a total business of over Rs 14.82 lakh crore.
When the three banks are merged, the combined entity’s capital adequacy ratio will be at 12.25 per cent, with tier-1 capital at 9.32 per cent and net NPAs at 5.71 per cent. The merged entity will have nearly 9,500 branches. Bank of Baroda, Dena Bank and Vijaya Bank have about 85,600 employees between them.