The government on Wednesday said that 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 returned by banks. The banks will be allowed to return equity at par value," a finance ministry spokesperson said.
The clarification came in the face of reports that the Centre may ask banks to return equity at market value instead of 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, sources said.
Lately, many PSU banks 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 government, while others like Punjab National Bank are planning to do so shortly.
This was done in order to improve their earnings per share, 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 PSU banks soared to all time highs after they posted over 50 per cent growth in profit, improvement in capital adequacy ratio and reduction of non-performing assets.
Scrip prices of Bank of Baroda, Bank of India, State Bank of Travancore and State Bank of Mysore touched 52-week high on Tuesday.
