Industry

Centre adopts new criteria for capital infusion into banks

The Centre has selected nine Public Sector Banks (PSBs) for infusing Rs. 6,990 crore out of the current year’s budget. Based on a new criterion that rewards only efficient banks with extra equity capital, the State Bank of India is to get Rs. 2,970 crore and Bank of Baroda Rs. 1,260 crore, according to an official release.

Punjab National Bank will receive Rs. 870 crore and Canara Bank Rs. 570 crore. The efficiency parameter is based on the weighted average of return on assets (ROA) for all PSBs for the last three years. Banks above the average have been selected for the equity infusion, the release explained.

The second parameter for capital infusion is return on equity (ROE) for the last financial year. Banks with above average ROE have been rewarded, the release further said.

The Government of India is conscious of the fact that a lot of reforms are required in the PSBs, the release said, adding that for the last few years, the Centre was infusing capital into those banks that were suffering equity erosion. Therefore, this year, the Government has adopted new criteria in which only 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 said.


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Printable version | Dec 6, 2021 3:16:30 AM | https://www.thehindu.com/business/Industry/centre-adopts-new-criteria-for-capital-infusion-into-banks/article6869292.ece

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