Mumbai: The government has agreed to infuse Rs 775 crore in the third largest state-owned lender Bank of Baroda, a top official of the bank said on Monday.
"As part of increasing its stake to the mandated 58 percent, the government has agreed to pump in Rs 775 crore into our bank. The fund infusion will happen before the end of the fiscal," BoB Chairman and Managing Director M D Mallya said. This could be done by a preferential allotment, he added.
In March, the government had pumped in Rs 2,675 crore, thereby increasing its stake to 57.3 percent from 53 percent earlier, Mallya said, adding that with the infusion of Rs 775 crore, the government ownership in the bank will touch the mandated 58 percent.
Some years ago, the government had decided to maintain at least 58 percent stake in all its banks. The development comes even as the nation's largest lender State Bank of India awaits action on its over a year-old demand for capital infusion to meet the mandatory core capital requirement and to fund expansion.
The latest on this request, according SBI Chairman Pratip Chaudhuri, is that government may infuse Rs 3,000-4,000 crore by the end of the year.
SBI has been seeking the government nod to go in for a Rs 20,000 crore rights issue since the beginning of fourth quarter of the past fiscal, but a cash-strapped government has not given its permission as it would have to buy nearly two- thirds of the issue.
As per on Monday's market price of Rs 678.75, the per share value for the government works out to Rs 852, a 26 percent premium.
But the final issue price will be based on the last six months' average price, which is as per market regulator Sebi's formula. The move will also boost the CAR which currently stands at 8.8 percent.
Last month, the bank had informed the BSE that it was looking to raise Rs 775 crore through a preferential issue of equity shares or convertible warrants before March.
The BoB counter closed 0.43 percent up on Monday on the BSE at Rs 678.75, while the main index Sensex rallied 1.47 percent or 230 points.