Capital Infusion Current Affairs - 2019
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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.
Union Finance Ministry is planning to infuse additional capital close to Rs 11,336 crore in 5 more public sector banks (PSBs) by September 2018-end. These five state-owned banks are Punjab National Bank (PNB), Corporation Bank, Andhra Bank, Allahabad Bank and Indian Overseas Bank (IOB).
This round of capital infusion will be done through issuance of recapitalisation bonds and not directly from Budget. This additional capital will help these banks to meet minimum regulatory capital adequacy ratio (CAR) and enable them to make interest payments on certain bonds on time.
Within capital infusion plan of these five PSBs, PNB is expected to get highest amount of Rs 2,816 crore. Corporation Bank is will get Rs 2,555 crore followed by Indian Overseas Bank (Rs 2157 crore), Andhra Bank (Rs 2,019 crore) and Allahabad Bank (Rs 1,790 crore).
This capital infusion by Government will be only for purpose of meeting minimum regulatory requirement and will be not growth capital which will be provided in second half of current fiscal year. The growth capital will only be given to those banks which meet performance targets and modalities set by Finance Ministry as per agreement signed with each bank.
The latest round capital infusion in these 5 PSBs will be part of remaining Rs 65,000 crore out of Rs 2.11 lakh crore capital infusion announced by Union Government for two financial years. In October 2017, Union Government had announced Rs 2.11 lakh crore capital infusion programme, under which PSBs were to get Rs 1.35 lakh crore through recapitalisation bonds, and balance Rs 58,000 crore through raising of capital from market and remaining through budgetary support. The government has already infused Rs 80,000 crore out of Rs 1.35 lakh crore through recapitalisation bonds in PSBs and balance will be done during this financial year (2018-19).