With a view to encourage efficient banks, the government has decided to infuse Rs 6,990 crore in nine public sector banks (PSBs) in the current financial year on the basis of new criteria based on efficiency parameters.
These banks include the State Bank of India (SBI), Bank of Baroda (BoB) and Punjab National Bank (PNB), among others, and the plan is to enhance their capital and meet global risk norms.
As per a release issued by the government, the infusion into State Bank of India will be Rs 2,970 crore while for Bank of Baroda, it will be Rs 1,260 crore. Punjab National Bank will be receiving funds to the tune of Rs 870 crore while Canara Bank will receive Rs 570 crore.
Syndicate Bank, Allahabad Bank, Indian Bank, Dena Bank and Andhra Bank will be allocated Rs 460 crore, Rs 320 crore, Rs 280 crore, Rs 140 crore and Rs 120 crore respectively.
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.
“Out of the current year’s budget, the Government of India has decided to infuse Rs 6,990 crore in nine Public Sector Banks (PSBs) for which orders are being issued,” an official statement said.
As per the new criteria, the 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.
Besides this, the return on equity (RoE) for these banks for the last financial year was also taken into consideration and those who have performed better than average were rewarded, the government said.
For the last few years, government has been infusing capital to those banks whose equity erosion has taken place.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, the release added.
“The methodology for arriving at the amount to be infused in these banks has been based on efficiency parameters. 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,” it said.
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.
