The Department of Financial Services in a letter on Thursday conveyed the sanction for release of the fresh capital infusion fund of Rs 2,153 crore, Allahabad Bank said in a filing post market hours on Thursday. The capital infusion is towards the contribution of the central government in the preferential allotment of equity shares of the bank during the financial year 2019-20 as the government’s investment, it said.
Infusion of the capital into the bank by the government comes ahead of the bank’s merger with Indian Bank announced by the Finance Minister Nirmala Sitharaman on 30 August 2019.
The combined entity will be seventh largest public sector bank with business of Rs 8.08 lakh crore.
Allahabad Bank reported a net loss of Rs 2114.06 crore in Q2 September 2019 over a net loss of Rs 1822.71 crore in Q2 September 2018. Total income rose 4.8% to Rs 4622.90 crore in Q2 September 2019 over Q2 September 2018.
Government of India (GoI) holds majority stake of 92.01% in Allahabad Bank as on 30 September 2019.
Meanwhile, shares of state-run banks were in demand today after the Reserve Bank of India (RBI) on Thursday said it will buy Rs 10,000 crore worth of the current benchmark 10-year bond on 30 December 2019 while selling four bonds maturing in 2020 for an equivalent amount. Simultaneously buying long-end bonds and selling short-end bonds should lead to a flattening of the yield curve.
The falling yields and rising bond prices are credit positive for state-run banks as mark-to-market (MTM) profit from the government bonds’ increases in their investment portfolios.