Business
Rs.6,990 crore infusion into nine public sector banks: Government
New Delhi, Feb 7
The government has decided to
infuse Rs.6,990 crore in nine public sector banks (PSBs) soon, out of
the current year's budget, for which orders are being issued, an
official statement said Saturday.
"This year, the government of
India has adopted a new criteria in which the banks which are more
efficient would only be rewarded with extra capital for their equity so
that they can further strengthen their position," the statement said.
The
banks that will be the beneficiaries of the infusion are: State Bank of
India, Rs.2,970 crore; Bank of Baroda, Rs.1,260 crore; Punjab National
Bank, Rs.870 crore; Canara Bank, Rs.570 crore; Syndicate Bank, Rs.460
crore; Allahabad Bank, Rs.320 crore; Indian Bank, Rs.280 crore; Dena
Bank, Rs.140 crore and Andhra Bank, Rs.120 crore.
This is the
first tranche of capital infusion from the government, which had
allocated Rs.11,200 crore in the 2014-15 budget for the purpose. Indian
PSBs require equity capital of Rs.2.4 lakh crore by 2018 to meet global
Basel III norms on capital adequacy.
The methodology for arriving
at the amount to be infused in these banks has been based on efficiency
parameters, the statement said.
"First of all, weighted average
of return on assets (ROA) for all PSBs for last three years put together
was arrived at and all those who were above the average have been
considered.
"The second parameter that has been used is return on
equity (ROE) for these banks for the last financial year. Those who
have performed better than average have been rewarded," it added.
Stating
that the central government is conscious of the fact that a lot of
reforms are required in the PSBs, it arranged for the recent two-day
retreat of chairman and managing directors of banks and financial
institutions called 'Gyan Sangam' at Pune Jan 1 and 2, 2015.
"One
of the general principle adopted during the Retreat was that efficient
banks should be encouraged. For the last few years, government of India
has been infusing capital to those banks whose equity erosion has taken
place," it said.
Therefore, this year, the government has adopted
this new criteria in which the banks which are more efficient would
only be rewarded with extra capital for their equity so that they can
further strengthen their position, it added.