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The Finance Ministry has notified that the government would infusion Rs 14,500 crore through recapitalisation bonds in four public sector banks. The government will infusion Rs 14,500 crore into Central Bank of India, Indian Overseas Bank, Bank of India and UCO Bank by issuing non-interest bearing bonds to them despite reservations raised by the Reserve Bank of India (RBI) over the use of this instrument. Central Bank of India will receive highest capital infusion of Rs 4,800 crore, followed by Rs 4,100 crore by Indian Overseas Bank. Similarly, government will infuse Rs 3,000 crore in Bank of India and Rs 2,600 crore in UCO Bank.

The recapitalisation bonds would be issued with six different maturities and would be at par for the amount, in line with the application made by the eligible banks. The special securities would be repayable at par on the date of maturity. No interest would be payable on issue of these securities. This is a shift from the past when the government issued interest-bearing bonds to public sector banks.

To save the interest burden on recapitalisation bonds, the government last year decided to issue zero-coupon bonds for capital infusion of Rs 5,500 crore into Punjab and Sind Bank. The RBI had then flagged concerns over the calculation of an effective capital infusion made into the bank through this instrument issued at par.