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Low valuations hit govt banks’ non-core business sale plans
NEW DELHI: Cash-starved public sector banks have deferred the sale of their non-core assets, despite directions from the finance ministry, because of poor valuations.
NEW DELHI: Cash-starved public sector banks have deferred the sale of their non-core assets, despite directions from the finance ministry, because of poor valuations.
The public sector banks have registered a cumulative net loss of ₹18,000 crore on account of provisioning for non-performing assets – (loans that turn unproductive) that stood at 7.7% as on March 2016.
“The stumbling block is the valuation at this point in time…most banks are not getting the right price and therefore they have decided to wait for sometime…it would not be prudent to sell off the non core assets immediately,” an official source, who refused to be identified told Hindustan Times.
However, a few subsidiaries of the top banks such as PNB Housing Finance – a joint venture between Punjab National Bank and Carlyle Group, a global investment firm – are expected to get listed soon.
“There is genuine pressure on the banks as they are short of capital and given this situation, banks must focus on selling off their non-core assets sooner than later,” Ashvin Parekh, managing partner, APA Services said.
Finance minister Arun Jaitley has underlined the need for the government lenders to identify their non-core businesses that could be monetised.
Typically, mutual fund and insurance businesses are considered non-core for government banks.
However, Parekh added these businesses would support financial inclusion, which is not just about opening bank accounts.
Sources, on the other hand, said that hiving off these businesses would help in the bank consolidation process.
