Finance minister in the budget speech talked about the need of infusing more capital in the public sector banks (PSBs) to keep them in line with Basel-III norms. Following which finance ministry had asked the all public sector banks to submit capital raising plans.

Giving the proposals a concrete shape government has now decided to infuse Rs.6990 crores in nine public sector banks (PSBs) for which orders are being issued. This year, the government has adopted new criteria under which only those banks with comparatively more efficient working would be rewarded with extra capital for their equity so that they can further strengthen their position.

The methodology for deciding 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.

In a statement the finance ministry said, “The Government of India is conscious of the fact that a lot of reforms are required in the Public Sector Banks (PSBs).  With a view to crystallize idea for reforms,  two-day Retreat of CMDs of Banks and financial institutions called 'Gyan Sangam’ was held at Pune  in the first week of January.”

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.

One of the general principles adopted during the retreat was that efficient banks should be encouraged.  For the last few years, Government of India has been infusing capital to those banks whose equity erosion has taken place.  Therefore, this year, the Government of India has adopted the 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.

List of Banks which will be infused with capital