NEW DELHI: Indian Overseas Bank and Central Bank of India will benefit from the government's recent capital infusion as they have got a higher share as a proportion of their share capital, Moody's said today. "The capital infusion will improve their capitalisation at a time when asset quality pressure and elevated provisioning costs have negatively affected their financial performance," it said in its credit outlook titled, 'Indian Overseas Bank and Central Bank of India benefit from Government's capital infusion'.Last week, the government announced a Rs 22,915 crore capital infusion into 13 PSBs. "As a result, provisioning expenses are likely to remain elevated, constraining profitability and limiting the banks' internal capital generation. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19. In this context, the capital infusion will provide some respite to the recipient banks, especially those with weak capitalisation," Moody's said.Currently, such banks have market valuations significantly below book value, and are challenged to raise capital from public markets, it said.Hence, they have a greater dependence on government infusions for capital support.

Source: Economic Times July 25, 2016 06:33 UTC