Troubled banking giant Citigroup and the US Government have reached an agreement on the bailout of the bank, reports the Wall Street Journal. According to the press release from the Citigroup, it adds $40 billion of capital benefit through agreement with US treasury, the Federal Reserve Board, and the Federal Deposit Insurance Corp. (FDIC) on a series of steps to strengthen Citi's capital ratios, reduce risk, and increase liquidity,

Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses.

The plan would essentially enable the government to insure a slice of Citigroup's balance sheet. In exchange for this protection, Citigroup will give the government warrants to buy shares in the company, adds the report.

In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout.

Citigroup's stock took a beating last week and continued its downward spiral throughout the week, reaching its 13 year low. Even the announcement by its biggest shareholder Prince Alwaleed that he will increase his shareholding to 5% has not helped the stock. Even replacement of Chief Executive Officer Vikram Pandit has been discussed. Citigroup was earlier mulling a possible merger with Morgan Stanley, Goldman Sachs or State Street Bank.

Things for Citigroup in India have not been great, either. Last week 37 senior officials in Citi India were asked to leave as the bank has announced 50,000 more job cuts globally. Also Citi's South Asia head Sanjay Nayar has decided to quit and is being replaced by Mark Robinson, a relative outsider coming from Citi's Russia operations. The job cuts in India are expected to be more than 1,000 people, most of which will come from CitiFinancial India, the group's non-banking finance company.



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