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PSU banks likely to hit market by year-end
Public sector banks, with high government holding, may visit the capital market by the end of the year. Mahua Venkatesh reports.
Public sector banks, with high government holding, may visit the capital market by the end of the year. Amid present volatility in the markets, most banks along with other public sector undertakings have deferred their plans to launch public offers.
PSU banks, which are under pressure to increase their lendings in the wake of the economic slowdown, would require added capital.
“We are keeping our plans ready and once we see signs of recovery in the capital markets we will go in for public offers,” a banking source on condition of anonymity said.
A few banks have already restructured their capital base to ensure that subscribers get a higher earning per share once the public offers are launched.
While the Delhi-based Punjab and Sind Bank is 100 per cent owned by the government, the government holding in Central Bank of India is 80.20 per cent and it is 75.98 per cent in UCO Bank.
The government has also infused capital into Central Bank of India and UCO Bank to boost their capital adequacy ratio (CAR) and help in increasing their lending. As per norms, government holding in PSU banks has to be a minimum of 51 per cent.
The recapitalisation exercise would cost Rs 20,000 crore of which Rs 3,800-crore has already been approved by the Cabinet for infusion. Of the Rs 3,800 crore, Rs 1400 crore would go to Central Bank of India, while UCO Bank and Vijaya Bank will get Rs 1,200 crore each.
The move would enable banks raise their CAR over the 12 per cent mark, which is well above the Basel II norms which mandates banks to have a capital adequacy of 9 per cent.
