Punjab National Bank aims to raise equity capital by share sale up to about ₹7,000 crores as it seeks to strengthen its balance sheet in a pandemic-induced environment. The state-owned bank said in an exchange filing that it would raise a total of about ₹10,000 crores of capital through shares and tier 2 bonds. The equity capital of ₹7000 crores will be raised through qualified institutional placement (QIP), follow public offer (FPO), or rights issue. The common equity tier 1 (CET 1) capital of PNB which is the yardstick to measure a company’s financial strength stood at 11.9 percent higher than its last year’s 7.49 percent as on 31st March 2020.
United Bank of India and Oriental Bank of Commerce were amalgamated with PNB effective from April 1st, 2020. PNB now has about 11,000 branches, 1 lakh employees, more than 13,000 ATMs, and over ₹18 lakh crore of business mix. During the period 2019 – 2020, the government infused capital of ₹16,091 crores in PNB and ₹5908 crores in the previous year. 75.41 percent of the shares of PNB were held by the government as of March 2019 which rose to 83.19 percent post-September.
Many banks in the country are trying to bring up their equity base on the anticipation of an increase in bad loans originating because of the COVID-19 pandemic, but PNB is trying to increase their capital. In the fiscal year, 2021 SBI (State Bank of India) the largest bank in the country is looking forward to raising a capital of up to ₹20000 crores. Many private sector banks are developing plans to raise capital, Yes the bank is going to raise capital to ₹15,000 crores through follow up on the public offer. ICICI bank is going to raise ₹15,000 crores as equity capital, after a gap of 13 years they said on Wednesday. HDFC Bank which is India’s largest private sector lender is planning to raise capital through selling shares in India, and also by issuing American Depository Receipts (ADRs) in the third quarter of 2020-21, they plan to raise capital between ₹10,000 crore to ₹13,000 crore.
Indian banks will need to raise $20 billion additional capital as the credit quality of banks are decreasing due to the decreasing ability of loan takers to pay back in time as there is a huge loss in income of people due to COVID-19, according to a Credit report published on 27th May 2020. The raising of new capital will provide banks with adequate funds for the next 12 months to improve their provisioning.
