Finmin revises criteria for recapitalisation of PSU banks

State-owned banks looking forward to the next round of capital infusion will need to fulfil a new set of criteria, including credit recovery, as the Finance Ministry has revised the recapitalisation norms.

Norms:

The capital allocation for the current fiscal would be based on

• Cost of operations as well as recovery and
• Quality of credit on the basis of risk weighted assets.

Only those lenders that fulfil the criteria post third quarter (October-December) results of the current fiscal will be eligible for the second round of funding.

Details:

The government in July had announced the first round of capital infusion of Rs.22,915 crore for 13 banks.

• Seventy five per cent of the amount (Rs.22,915 crore) is being released now to provide liquidity support for lending operations as also to enable banks to raise funds from the market.
• The remaining amount, to be released later, will be linked to performance with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations.
• The first tranche was announced with the objective to enhance their lending operations and enable them to raise more money from the market. Out of the Rs.22,915 crore, State Bank of India (SBI) was provided Rs.7,575 crore followed by Indian Overseas Bank (Rs.3,101 crore) and Punjab National Bank (Rs.2,816 crore).
• Allahabad Bank (Rs.44 crore) receives less amount.