These banks have come under pressure because of interest payment to their bondholders of Additional Tier 1 (AT-1) bonds.
As a result, they were facing the risk of breaching the regulatory capital requirement, sources said, adding that the ministry has decided to provide capital to 4-5 banks which are facing "acute shortage".
Banks raise capital through AT1 bonds, which are perpetual in nature and therefore provide higher interest rate to investors. A high level of bad loans and widening losses have made it difficult for banks to service these bonds from their own earnings.
Five banks which will soon get capital include Punjab National Bank (PNB), hit by Nirav Modi scam, which will get the highest amount of Rs 28.16 billion out, while Allahabad Bank to get Rs 17.9 billion.
Besides, Andhra Bank to get Rs 20.19 billion, Indian Overseas Bank - Rs 21.57 billion and Corporation Bank - Rs 25.55 billion.
The infusion would be the part of remaining Rs 650 billion out of Rs 2.11 trillion capital infusion over two financial years.
In the second half of the current fiscal, the official said, banks will get growth capital to enable them to expand lending activity.
The government announced Rs 2.11 trillion capital infusion programme October last year. As per the plan, the PSBs were to get Rs 1.35 trillion through re-capitalisation bonds, and the balance Rs 580 billion through raising of capital from the market.
Out of the Rs 1.35 trillion the government has already infused about Rs 710 billion through recap bonds in the banks and balance would be done during this fiscal.
Besides, PSBs are also planning to tap the markets to raise more than Rs 500 billion this fiscal to shore up their capital base for business growth and meeting regulatory global risk norms.
Capital is very much required for these banks as they are saddled with non-performing assets (NPAs) or bad loans of about Rs 10 trillion.
Out of 21 public sector banks, 13 have already taken the approval of their boards or shareholders for raising capital through the equity market,
The combined value of the shares sales of these banks is upwards of Rs 500 billion.
Leading the pack is the Central Bank of India, which has already got shareholders' approval for raising Rs 80 billion equity capital through various means, including a follow-on public offer, rights issue or a qualified institutional placement (QIP), to shore up its capital base.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.