Indian Govt to inject 69.90 billion rupees ($1.13 billion) in Nine Public sector Banks

Indian government will infuse Rs 6,990 crore in nine state-run banks under new criteria which reward efficient banks with extra capital to strengthen their position.

This is the first tranche of capital infusion for which the government had allocated Rs 11,200 crore in the Budget for 2014-15. The entire fund infusion of Rs 6,990 crorewill be completed before March 31. To comply with Basel-III norms there is a requirement to infuse Rs 2,40,000 crore as equity by 2018 in Indian banks.

Among the beneficiaries, largest public sector lender State Bank of India (SBI) leads with a capitalisation of Rs 2,970 crore, followed by BoB Rs 1,260 crore, PNB Rs 870 crore and Canara Bank Rs 570 crore. In addition 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.

The capital infusion has been decided based on the performance of the bank. Better the performance higher will be the infusion.

The methodology for arriving 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.

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.

While preserving the public ownership, the capital of these banks will be raised by increasing the shareholding of the people in a phased manner through the sale of shares largely through retail to common citizens of this country

The government has infused Rs 58,600 crore between 2011 to 2014 in the state-owned banks.