New Delhi: The government has announced a capital infusion of Rs.6990 crore in nine state run banks, including State Bank of India (SBI) and Punjab National Bank (PNB), based on new efficiency parameters such as return on assets and return on equity.
“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 finance ministry said in a statement.
This is the first tranche of capital infusion for which the government had allocated Rs 11,200 crore in the Budget for 2014-15.
SBI, the largest public sector lender, will be the biggest beneficiary of this infusion with the capital amount of Rs 2970 crore. The next in lead is BOB with the capital amount of Rs 1260 crore and following it are PNB with Rs 870 crore and Canara Bank Rs 570 crore.
Among the beneficiaries, largest public sector lender SBI leads the pack with a capitalization of Rs 2,970 crore, followed by BoB Rs 1,260 crore, PNB Rs 870 crore and Canara Bank Rs 570 crore.
Syndicate Bank will get Rs 460 crore, Allahabad Bank Rs 320 crore, Indian Bank Rs 280 crore, Dena Bank Rs 140 crore and Andhra Bank Rs 120 crore.
An official statement said this criterion for capital infusion has been adopted for the first time in which banks which are more efficient will be rewarded with the higher capital so that they can strengthen their position further.
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.
The government is in the process of deciding on remaining Rs 4,210 crore capital infusion. The entire fund infusion will be completed before March 31.
Public sector banks require equity capital of Rs 2.4 lakh crore by 2018 to meet global Basel III norms on capital adequacy. For the current fiscal, the government has allocated Rs 11,200 crore for bank capitalization.
From 2011 to 2014, government had infused Rs 58,600 crore in the state-owned banks.
In the statement, it is also mentioned that the government is conscious of the fact that a lot of reforms are required in the state-owned banks and in order to assimilate the same, a two-day Retreat of heads of public sector banks and financial institutions called ‘Gyan Sangam' was held recently.
"This Retreat generated an agenda in which banks themselves were supposed to undertake certain activities individually or jointly and there were certain things which were supposed to be done by the government," the statement also said.
