Capital Infusion Current Affairs - 2019

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Capital Infusion of Rs. 48,239 Crore into 12 State-Run Banks

The government has approved the capital infusion of Rs. 48,239 Crore into 12 State-Run Banks. The capital inclusion has been undertaken to ensure the lenders are able to maintain regulatory capital requirement and step up lending and boost overall growth.

With this latest capital infusion, the government has now the government has now provided Rs 1,00,958 crore out of the Rs 1.06-lakh-crore bank recapitalisation plan. The remaining Rs. 5,000 crore capital infusion would be used as a buffer for any contingency or growth capital for Bank of Baroda which is in the process of merging Dena Bank and Vijaya Bank with itself.

How the capital infusion will benefit these PSBs?

RBI has lifted the curbs under the Prompt Corrective Action framework on Bank of India (BoI), Bank of Maharashtra (BoM) and Oriental Bank of Commerce (OBC) in early 2019. Eight other PSBs — Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Central Bank of India, Indian Overseas Bank and Dena Bank are still under PCA. PCA imposes curbs on expansion activities, among a number of other restrictions to help them get back to fiscal health.

The capital infusion has been undertaken to ensure that state-run lenders, which have emerged out of the PCA, remain above the triggers and help others such as Indian Overseas Bank, Central Bank, United Bank and UCO Bank meet minimum regulatory capital requirements.

Government approves Capital Infusion to the Exim Bank

The Union Cabinet headed by Prime Minister Narendra Modi has approved a capital infusion of Rs 6,000 crore in state-owned Export-Import Bank of India (Exim) to expand its business.

How the capital infusion would be made?

Key facts about the capital infusion proposal are:

  • The government would issue recapitalisation bonds to the tune of Rs 6,000 crore for capital infusion of Exim Bank.
  • The capital infusion would take place in two tranches of Rs 4,500 crore in 2018-19 and Rs 1,500 crore in 2019-20 respectively.
  • The government has also approved an increase in the bank’s authorised capital from Rs 10,000 crore to Rs 20,000 crore.

Authorised capital refers to the maximum amount of capital for which shares can be issued by a company. The Authorised capital would be mentioned in the Memorandum of Association of the Company and can be increased at any time in future.

The capital infusion and increase in authorised capital give an impetus to new initiatives such as supporting Indian textile industries, likely changes in the Concessional Finance Scheme, likelihood of new letters of credit in future in view of the country’s active foreign policy and strategic intent. This will have a positive impact on increasing the exports of India.

Export-Import Bank of India (Exim Bank)

Exim Bank is a premier export finance institution of India. It was established in 1982 under the Export-Import Bank of India Act to promote the Indian exports. Exim Bank assists the Industries across wide avenues like import of technology, export product development, export production, export marketing, pre-shipment and post-shipment and overseas investment.