The Hindu : Govt may attach premium on equity returned by PSBs

Online edition of India's National Newspaper
Saturday, May 31, 2003

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Govt may attach premium on equity returned by PSBs

NEW DELHI MAY 30 . The Union Finance Ministry today said it had neither decided nor had intention to accept return of equity from public sector banks at par value, when the market value was much higher.

"It has been clarified that it has neither been decided nor is it the intention of the Government to accept return of equity from some listed PSBs at par when the price is higher in the market,'' an official release said.

The clarification came in the face of reports that the Centre will accept return of equity at face value.

In 1994-95, public sector banks were provided additional capital by the Government to enable them to meet the stringent prudential norms set by the Reserve Bank of India.

Of late, many PSBs have been returning a portion of government equity with improvement in the financial performance including capital adequacy ratios.

Bank of India, Canara Bank and Andhra Bank are among the PSBs that returned equity to the Government while others such as Punjab National Bank are planning to do so shortly.

These were done to improve their earnings per share (EPS), especially by those banks opting to tap the capital market.

However, the Government did not get any benefit as the banks returned the equity at par instead of the market price.

In recent months, prices of PSBs soared to all time highs after they posted over 50 per cent growth in profit, improvement in CAR and reduction of NPAs. — PTI

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