Govt may add two new criteria for fresh fund infusion in PSBs

Special consideration for banks with international branches, those with operations in eastern belt

The government is likely to add two more parameters for capital infusion in state-run banks including geographical location of lenders and their presence in the overseas market apart from return on capital and equity.

The Centre will restart capital infusion process in state-owned banks from next month onwards.

A committee formed by Indian Banks' Association (IBA) to suggest new criteria for capital infusion in state-run banks has submitted its report before the Finance Ministry.

The committee has suggested that ministry should consider geographical factor so as to help the banks located in the eastern belt match in performance with that of banks located in other parts of the country.

Secondly, the committee has also said that lenders like Bank of India (BoI) with major overseas presence should also be given special consideration keeping in view the fact that the international banking was not doing well.

"They (the ministry) have also realised that some banks such as United Bank of India, Allahabad Bank and UCO Bank which have more concentration on the east side.

For them, naturally the revenue scope is less.

In both the segments, return on capital will be lower," Bank of India Chairperson and Managing Director Vijayalakshami R Iyer, who is on the panel, said.

"They have also realised that some banks like Bank of India (BoI) have got international presence.

So, for them the criterion has to be different as international banking is not doing well," she added.

The IBA committee has sent the proposal to the ministry and they are looking into it, she added.

It could be noted that in FY15 the government had infused Rs 6,690 crore to nine public sector banks (PSBs), including State Bank of India, Punjab National Bank and Bank of Baroda, based on their return on equity and return on asset.

Country's largest public sector lender SBI had received maximum capital of Rs 2,970 crore, Allahabad Bank Rs 320 crore, Indian Bank Rs 280 crore and Andhra Bank Rs 120 crore.

The government had infused capital of Rs 1,260 crore in Bank of Baroda, Rs 870 crore in Punjab National Bank, Rs 570 crore in Canara Bank, Rs 460 crore in Syndicate Bank and Rs 140 crore in Dena Bank.

However, the heads of PSBs had suggested for change in criteria for capital infusion in the review meeting which was held by Finance Minister Arun Jaitley in New Delhi last month with the lenders.

SBI chairman Arundhati Bhattacharya had expressed that some road map should be drawn by the government for providing recapitalisation support to banks.

In the meeting, Minister of State for Finance Jayant Sinha had also hinted that the basis of the government's allocation of capital in state-run banks may be reviewed.