Public sector banks, which need to raise nearly Rs 2.5 lakh crore to meet the stringent Basel-III capital requirement norms, have been finding it tough to raise capital by hiving off their non-core businesses.
The government had instructed banks to monetise non-core businesses such as mutual funds and insurance to raise funds, but banks have been stymied due to low valuations of these businesses, sources said.
State-owned banks are likely to hit the capital markets soon to dilute government stake to raise funds.
“Banks have not been able to hive off any of their non-core businesses as yet because of low valuations…until the economy is back on a sustained recovery path, it cannot be undertaken,” an official source who did not wish to be identified told HT.
The finance ministry had asked banks to identify non-core assets that could be monetised. Each bank would finally present its own plan, which would be part of their overall recapitalisation exercise.
“While most lenders have more or less identified their non-core assets, they have not concretised their plans on how to monetise them yet,” a chairman of a mid-sized public sector bank said. “However, it is one aspect we are looking at and would be done according to the needs of banks.”
Lender need over Rs 2,40,000 crore as equity to meet the global capital adequacy norms by 2018.
According to the Reserve Bank of India, gross NPAs (non-performing assets) of PSU banks stood at Rs 2,60,531 crore, as on December 2014. NPAs are loans that do not yield returns.
The total number of defaulting borrowers, who have over Rs 10 crore and above at the end of September 2014, stood at 2,897, with an outstanding amount of Rs 1.60 lakh crore.