PSU banks to hit markets after getting in shape

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Sep 10, 2014 00:20 IST

Public sector banks are unlikely to hit the market anytime soon, even as they require a mammoth Rs. 2,40,000 crore to meet the stringent Basel III norms.

The banks are expected to chalk out a roadmap to hit the market to raise resources as suggested earlier only after their houses are put back in order with better profit margins and reduced level of non-performing asset (NPA).

The government, however, underlined that the banks would maintain their public sector character even as they tap the capital market.

Earlier the government had said that the state owned banks would finalise the plan outlining how they would raise resources from the market by the year end.

Finance minister Arun Jaitley has underlined that the recapitalisation exercise of banks was a ‘high priority’ item for the government.

“Banks would wait before going to the market to raise capital, as at present the level of NPA is high and most banks are not in a very comfortable financial position, so first they would focus on setting things in order and then going to the market,” a senior government official who did not wish to be identified told HT.

Banks would raise capital from the market in a phased manner. At present, the government shareholding in these banks ranges between 56.26% and 88.63%.

“The government proposes to raise capital by sale of shares largely through retail to common citizens of the country while preserving the public ownership,” the finance ministry had said earlier.

The government banks are also set to hive off their non-core businesses which include insurance and mutual funds to raise resources.

Each bank will present its own plan on this, which will be part of the overall recapitalisation exercise of banks.

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