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Zero-coupon bonds on govt table for PSBs

Move part of Centre's commitment to pump in over Rs 2 lakh cr to help NPA-hit PSU banks meet global adequacy norms

Press Trust of India  |  New Delhi 


The ministry is considering zero-coupon as one of the options to recapitalise NPA-hit public sector banks as part of its commitment to pump in Rs 2.11 lakh crore to help them meet global capital adequacy norms under Basel III. There are various options on the table and zero-coupon is one of them, a senior ministry official said.

However, the discussion is at a preliminary stage, the official said, adding that final decision with regard to the Rs 1.35 lakh crore recapitalisation will be taken towards the end of the next month.

are debt instruments that are issued at a discount, but are redeemed at face value after the expiry of the specified tenure.

For example, a bond with a face value of Rs 100 may be issued at Rs 85 for two years. At the end of the two years, the bondholder will get Rs 100, implying an interest of Rs 15.

Earlier this week, the unveiled Rs 2.11 lakh crore two-year roadmap for strengthening NPA-plagued public sector banks, which include recapitalisation bonds, budgetary support, and equity dilution.

The programme entails mobilisation of capital, with maximum allocation in the current year through budgetary provisions of Rs 18,139 crore, and recapitalisation bonds to the tune of Rs 1.35 lakh crore over the next two years.

The balance will be raised by banks from the market by diluting equity. The government's equity dilution would help banks raise about Rs 58,000 crore. The equity, as per the current policy, can come down to 52 per cent in state-owned banks.

Minister Arun Jaitley while announcing the roadmap had said the capital infusion would be accompanied by reforms to enable the state-owned banks to play a major role in the financial system.

Jaitley had said the details of the recapitalisation bonds would be determined in due course.

First Published: Sat, October 28 2017. 00:58 IST