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Current affairs is an important component of several competitive exams such as the UPSC Civil Services Examination, SSC CGL, Bank PO & PSU entrance tests, etc. Therefore, understanding the terms/concepts/events that make news is critical for aspirants. We at PaGaLGuY bring you series of articles explaining some of these important concepts/events. Read on to know about Indian government’s capital infusion in public sector banks.

On February 7, the government announced a capital infusion
of Rs.6990 crore in the current fiscal in nine PSBs. The aim is to help banks struggling
with NPAs to strengthen their position.

This is the first portion of a total of Rs.11200 crore that
the government had allocated in the 2014-15 Budget for capital infusion.

Based on performance

New efficiency parameters have been outlined to ensure that
only efficient and highly performing banks are benefitted with the capital
infusion. Criteria including return on assets (ROA) and return on equity (ROE),
were considered.

Firstly, average of return on assets (ROA) for all PSBs for
last three years put together was calculated and all the banks with an above average
ROA have been considered.

Similarly, ROE for these banks for the last financial year has
been considered. Those who have performed better than average have been
rewarded. 

Banks and their share:

State Bank of India- Rs.2,970 crore

Bank of Baroda- Rs.1,260 crore

Punjab National Bank-Rs.870 crore

Canara Bank-Rs.570 crore

Syndicate Bank- Rs.460 crore

Allahabad Bank- Rs.320 crore

Indian Bank- Rs.280 crore

Dena Bank- Rs.140 crore

Andhra Bank-Rs.120 crore

The government has kept a lid on the remaining Rs.4,210
crore capital so as to curtail fiscal deficit. Banks excluded from the list are
expected to focus more on retail loans instead of corporate loans so as to
conserve reserves.

While the government has specified that it will reduce its stake in state run banks to 52% to give them more opportunities to
raise funds, most banks are expected to approach the market to raise capital
only in the next fiscal.

From 2011-2014 a total of Rs.58,600 crore has been infused
in PSBs. While earlier the policy was to help banks that was eroded in terms of
performance and funds, the new approach is to support banks that
perform well.

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