The government Thursday announced conversion of its preferential shares in three public sector banks – Indian Bank, UCO Bank and Vijaya Bank — into equity shares, in order to make more funds available to these lenders.
The union cabinet headed by Prime Minister Manmohan Singh approved the proposal of conversion of “Perpetual Non-Cumulative Preference Shares (PNCPS)” held by thed government of India in Indian Bank, UCO Bank and Vijaya Bank into equity shares of these banks.
The amount of shares to be converted into the equity is Rs.1,823 crore for UCO Bank, Rs.1,200 crore for Vijaya Bank and Rs.400 crore for Indian Bank.
The move will enhance the Tier-1 capital of the public sector banks, “thereby making available more funds at their disposal to meet the credit requirement of the productive sectors of economy,” according to an official statement released after the meeting.
“It will also provide impetus to the economy by including the under-banked rural and semi-urban areas,” it said.
The conversion is proposed to be done in the financial year ending March 31, 2014, subject to approval of shareholders and also the Securities and Exchange Board of India (SEBI) and other authorities, it said.