Pushed against the wall due to rising bad loans, higher provisioning and financial losses, some public sector banks (PSBS) are speeding up plans to sell non-core assets.
Non-core assets are investments made by banks that are not related to core areas of lending and borrowing, and includes strategic investments in other firms, real estate, holdings in subsidiaries and joint ventures. A Jefferies report last year estimated the total worth of non-core assets in PSBs to be around $8 billion.
Last week, State Bank of India invited bids from investors to sell its 5% stake worth `1,000 crore in National Stock Exchange (NSE), and is also learnt to be evaluating options to sell a 21.67% stake in Central Warehousing Corp. The SBI also has real estate assets worth `20,000 crore, and plans to list its life and general insurance subsidiaries to raise funds. Some of these plans are likely to be announced this week.
IDBI Bank said it plans to raise $1 billion (around `6,500 crore) in 2016-17 through the sale of non-core assets. “About `5,000-6000 crore worth of capital will be needed in 2016-17,” MD Kishore Kharat told HT. Though the bank had planned to raise about `650 crore before March, it could only manage `450 crore through non-core asset sale. In March, IDBI Bank sold its 2% stake in the NSE to Life Insurance Corp of India.
Bank of Baroda also said its process to sell non-core assets is on. “About `1,000-1,500 crore worth of disposal of investments may take place this year,” MD and CEO PS Jayakumar said.