The Hindu : Banks allowed to return capital at face value

Online edition of India's National Newspaper
Thursday, May 29, 2003

Business

Business

Banks allowed to return capital at face value

NEW DELHI MAY 28. The Government today said banks would be allowed to return equity at face value and as of now there was no proposal of attaching a premium.

"As of now, there is no proposal from the Government to charge premium on equity return by banks. The banks will be allowed to return equity at par value,'' a Finance Ministry spokesperson said here. The clarification came in the face of reports that the Centre may ask banks to return equity at market value instead of the 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, the sources said.

Lately, many PSBs have been returning a portion of Government equity with the improvement in their financial performance including capital adequacy ratios, they added.

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

This was 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.

Shares of Bank of Baroda, Bank of India, State Bank of Travancore and State Bank of Mysore touched 52-week high on Tuesday. — PTI

Printer friendly page
Send this article to Friends by E-Mail

Business