Just three weeks before the Union Budget, the finance ministry on Saturday announced it would infuse Rs 6,990 crore of capital into nine public sector banks based on new criteria where banks would be “rewarded” with capital infusion based on their performance and efficiency.
“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,” said a finance ministry 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.
Among the beneficiaries, largest public sector lender SBI leads the pack with a capitalisation of Rs 2,970 crore, followed by Rs 1,260 crore to Bank of Baroda, Rs 870 crore to Punjab National Bank and Rs 570 crore to Canara Bank.
The finance ministry said that the amount of capital to be infused in each bank has been decided based on its performance. Under the methodology, better performance of the bank will be rewarded with higher 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,” 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.
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 capitalisation.
With this objective, the Union Cabinet has also permitted banks to dilute government equity to upto 52 per cent in order to raise funds for capital needs.
Finance minister Arun Jaitley in the Budget speech had said that “to be in line with Basel-III norms there is arequirement to infuse Rs 2,40,000 crore as equity by 2018 in our banks. To meet this huge capital requirement we need to raise additional resources to fulfil this obligation”.
Axis Bank to raise up to R15K cr through pvt placement
MUMBAI: Private sector lender Axis Bank on Saturday said it will seek shareholders’ approval for raising up to Rs 15,000 crore by issuing long-term bonds or non-convertible debentures to select investors in the domestic market.
The bank informed BSE that it seeks to raise the fund on “private placement bases, in one or more tranches, as per the structure and within the limits permitted by the RBI, of an amount not exceeding Rs 15,000 crore”.
Axis Bank had reported an 18.4 per cent rise in its netprofit to Rs 1,899.76 crore for the third quarter ended December 2014-15.
The third largest private sector bank’s net profit in the corresponding October-December quarter of last fiscal was Rs 1,604.11 crore. The gross NPAs of the bank stood at 1.34 per cent in the third quarter, over 1.25 per cent in the year ago period.