PNB scam: GNP receives conditional acquiescence from RBI to pay interest

MUMBAI: The National Bank of Punjab, which has been faced with a default of interest payments, has received conditional approval from the Reserve Bank of India to pay interest on its perpetual obligations that are due the week next. .

The beleaguered bank will have to raise Rs 135 crore in equity, the amount that it has to pay as interest on these bonds, either from the market or from the government by selling shares to pay the holders. obligations, said the people who did not want to be identified.

This special authorization comes after the bank violated RBI's minimum capital standards to pay interest on bonds that are called "perpetual bonds". These bonds carry higher interest rates as they risk losing interest payments like these when a bank is financially weak.

"The RBI said that the bank can make the payment provided that it is able to raise the minimum capital of Rs 135 crore on or before July 25," said L & # 39; one of the two cited above. "Keeping this in mind, the government is likely to infuse Rs 2,000 crore before July 24."

PNB sank into trouble after jeweler Nirav Modi cheated him of nearly 14,000 rupees. He recorded a record loss last year and his capital broke the regulatory minimum.

The bank is selling non-core badets and the government will invest Rs 2,000 crore to increase its equity. Its capital adequacy ratio fell to 5.95% instead of the regulatory minimum of 7.375% to continue paying interest on perpetual bonds.

"The good thing is that RBI has not given any regulatory forbearance to any bank to maintain the regulatory characteristics of debt capital instruments," says Anil Gupta, vice president, financial services at the rating company, iCRA.

The bank raised an additional Clbad I capital of Rs 1,500 crore with a coupon of 8.98%. In a stock market listing on July 7, the bank said it would pay interest on bonds subject to regulatory approvals.