Govt to seek Parliament's nod for $12.6bn Bank Recap Bonds

The central government has sought Parliament's nod for $12.6 billion Bank Recap Bonds. This is a follow up of a mega recapitalisation plan that was announced by the government in October 2017 to counter the rising bad loans of public sector banks. The plan is worth Rs2.11 lakh cr out of which Rs1,35,00cr will be in the form of recapitalisation bonds.

The ratification for recapitalization bonds would act significantly positive for the PSU Banks and the stocks would remain positive on this news. The capital infusion is much needed as it would aid these banks to improve their capital adequacy. As a consequence, it would also improve their loan book growth for the coming years, besides giving room to provide for bad loans.

Nifty PSU Bank Index has climbed over 1.5% after recap bond news. At the time of filing, IDBI Bank was up 6%, BoB, PNB were up by 3% each, Bank of India, Canara Bank were up 2% each, and SBI was up 1.5%.

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