LIC to pick up to 5% stake in Punjab & Sind Bank

State-owned Punjab & Sind Bank (PSB) today said it would issue shares up to 5% of the paid-up capital on preferential basis to Life Insurance Corporation (LIC).

"The additional capital will further strengthen Capital to Risk-weighted Assets Ratio (CRAR) of the bank and support its business growth," PSB said in a statement after the board meeting.

The bank proposes to issue 11.2 million fresh shares at a rate to be decided in terms of Sebi (Issue of Capital and Disclosure Requirements) Regulations, subject to approval from the government of India and other regulatory compliances, it said.

At the prevailing share price of PSB, LIC will have to pay about Rs 95 crore to the bank.

Shares of the bank today closed at Rs 85.75 apiece, up 4.13% on the Bombay Stock Exchange (BSE).

At present, the government holds 82.07% in the bank. After share transaction in favour of LIC, government's stake in the bank would come down.

The bank will seek approval of the shareholders for stake divestment in due course, it said.

The bank had raised Rs 470.82 crore in 2010 through an IPO, which was subscribed 50.75 times.

Last week, the board of Bank of Maharashtra had also given
 approval for divesting up to 5% stake to LIC in order to raise capital.

The board of directors of the bank has decided "to issue 2.53 crore equity shares as LIC of India may approve on preferential allotment basis...," Bank of Maharashtra had said.

"The Ministry of Finance has indicated their intention to infuse capital funds to the bank and advised the bank to take all preparatory steps in this regard," it said.

In pursuant to the government decision to recapitalise the bank, its board also approved issuance of additional equity of Rs 860 crore on preferential allotment basis to the government, it added.