The Telegraph
Friday , January 24 , 2014
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Cash prop for banks tied to performance

Takru: Setting a yardstick

Mumbai, Jan. 23: The government will infuse funds into state-owned banks on the basis of their retail lending performance, financial services secretary Rajiv Takru said here today.

In October last year, the Centre had announced a plan to infuse Rs 14,000 crore into 20 public sector banks in this fiscal. The capital infusion is being done with the twin objectives of meeting the credit requirement of the productive sectors of the economy and ensuring that banks have at least 8 per cent Tier-1 capital by the year-end.

The government had injected Rs 20,117 crore into nationalised banks during 2010-11 and Rs 12,000 crore in the following year.

While announcing the capital infusion programme, the finance ministry had said that any additional capital required by the banks for concessional lending to home, auto and consumer durables sectors might also be factored in over and above the Rs 14,000 crore.

The finance ministry had asked banks to provide more loans to these three segments during the festival season.

Takru today said it was premature at this stage to reveal the precise infusion in each bank. A decision will be taken next month after analysing the amount each bank has lent under the concessional lending scheme.

“The scheme is open till January 31. Based on their performance, we will give them additional capital. I don’t know what the amount will be as that needs to be worked out. We have not earmarked anything because the finance minister had promised that whatever you do we will find the resources to provide you the capital at that stage,” he said.

He also spoke against banks charging their own customers for ATM services. Now, customers do not have to pay any fee for using the ATM of their own bank. ATM services of another bank can be availed of without the payment of an additional fee for five transactions per month.

Following an attack on a Corporation Bank employee at an ATM in Bangalore in November last year, many states have sought round-the-clock security at all ATMs. The Indian Banks’ Association has estimated a cost of an additional Rs 40,000 per ATM per month.

It has therefore suggested a cap on the number of free transactions to five per month across all ATM network. A fee of Rs 20 has been proposed from the sixth transaction.