Punjab & Sind Bank equity recast gets nod

The Union Cabinet today approved equity restructuring of Punjab & Sind Bank to enable it to go for an initial public offer or private placement of shares to mobilise capital to expand business and implement technology.

Out of the 743 crore paid up capital, the government will convert nearly Rs 560 crore into preference shares and bonds while Rs 183.06 crore will be retained as pure equity. The restructuring is being done to increase the attractiveness of the bank to investors.

Of the Rs 560 crore, Rs 200 crore will be converted into preference shares, Rs 160 crore into innovative perpetual debt instrument and Rs 200 crore into Tier II bonds.

 

Keeping in view the weak financial position of the bank, the government has also decided to exempt P&SB from paying interest on Rs 200 crore bonds for three years till 2010-11. Thereafter, the bank will pay 100 basis points over the repo rate of the Reserve Bank of India.

The rate of interest on innovative perpetual debt and perpetual preference shares will be decided by the government in consultation with the bank.

The bank expects to raise Rs 1,000 crore by selling 25-30 per cent equity by October. After being the only loss making public sector bank in 2004-05, the bank has been making profit in the last three financial year and has the least non performing asset.