Life Insurance Corporation of India (LIC) is coming to the aid of the public-sector firms looking to shore up their capital position. The country’s largest insurer, which invested nearly Rs 3,000 crore in state-owned banks in the last financial year, is taking part in preference share issuances by banks in the current year as well.
UCO Bank said that it would sell 71.7 million shares to LIC on a preferential basis, which could fetch about Rs 270 crore to the bank.
According to a senior LIC official, these are long-term investments, which it will continue to explore based on market conditions and long-term opportunities.
At a time when banks are hesitant to raise funds from the market, preference shares could be an easier route to build up capital resources, say industry officials.
Moody’s Investors Service had said State Bank of India and 10 other public-sector banks would need Rs 1.2 lakh crore capital through 2020.
The government has announced Rs 70,000 crore capital infusion for 22 public sector banks by March 2019. Of this, Rs 25,000 crore has already been injected and the government plans to infuse as much during the current financial year. But, the amounts committed by government might turn inadequate due to the huge capital requirement to meet the rising capital adequacy requirements under Basel-III norms.(News Courtesy: business-standard)