Friday, August 26 2005 10:21 Hrs (IST) - World Time -

New Delhi: Punjab and Sind Bank will shortly get Rs 500 crore capital infusion from government that will enable it to come out of red and tap capital market by 2007.

Cabinet Committee of Economic Affairs, headed by Prime Minister Manmohan Singh, yesterday (August 25, 2005) gave post-facto approval to the Rs 500 crore package, Finance Minister P Chidambaram said briefing newsmen here.

He said the capital infusion was part of the first batch of supplementary demand for grants.

The package would enable the bank to come out of "narrow banking" and the embargo of "prompt corrective action".

With the capital infusion, PSB's gross non-performing assets will come down to 8 per cent while net NPAs would slide to 2 per cent by 2007-08.

The bank would be able to grow its loans by 12-15 per cent while improving the profits and capital adequacy ratio, he said.

PSB will also be able to comply with the stringent Basel-II norms partially by March 2006 and fully by March 2007. The bank needs about Rs 300 crore to comply with the Basel-II norms.

The assistance would also enable the bank to carry out technology upgradation.

PSB would be able to reduce its dependence on government for its future capital requirement and come out with an initial public offer in about two years to sustain its growth.