New Delhi, Aug 8 (UNI) The Union Cabinet today approved the restructuring of the capital of the Punjab and Sind Bank (P&SB), entailing Tier-I and Tier-II capital, to enable the Public Sector entity to go in for a Initial Public Offer (IPO) at a reasonable premium.
An amount of Rs 160 crore is to be converted into 'Innovative Perpetual Debt Instrument' and Rs 200 core into 'Perpetual Non-Cummulative Preference Shares, while retaining Rs 183.06 crore as the equity capital of the Bank.
Briefing newspersons on the outcome of the Cabinet decisions, Minister for Science and Technology Kapil Sibal said the annual floating coupon rate on the proposed 'Perpetual Non-Cumulative Preference Shares' of Rs 200 crore may be benchmarked to Repo Rate with a spread of 100 basis points with annual rests, which would be re-adjusted annually on the previaling Repo Rate on the relevant date.
However, Mr Sibal said, keeping in view the weak financial position of the Bank and to enable it to strengthen its capital base, the Bank would be allowed to pay a coupon benchmarked to Repo-Rate for 2008-09 and next two fiscals. Thereafter, the coupon rate is to benchmarked to Repo rate with a spread of 100 basis points.
The rate of interest on 'Innovative Pertual Debt Instrument' and 'Perpetual Cumulative Prederence Shares' will be decided by the government in consultation with the Bank.
''The decision will enable the bank to go for an Initial Public Offer at a reasonable premium for raising additional capital from the market. The enhanced capital will enable the Bank to expand its business in compliance with Base-II requirements and, thereby, improve its financial position,'' Mr Sinbal said.
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