The finance ministry has made it clear State Bank of India is not going to make a rights issue this fiscal year. The statement came in response to a request by SBI for permission to raise Rs20,000 crore through a rights issue. The move would have meant the government would have to spend Rs12,000 crore of its own just to maintain its current 59.4% stake in the bank. But the finance ministry said it would look at other ways in which SBI could get more capital. SBI has been coping with bad debts that had reached 3.3% of advances in the first quarter.
HDFC Bank has done better than expected in the second quarter. It reported a 31% increase in net profit to nearly Rs1200 crore. The profit was fueled by a 34% increase in retail loans. Overall, HDFC Bank’s loan book increased 20%. Loans to consumers account are worth a total of some Rs 92,000 crore nearly half of the bank’s total book. HDFC said it expected the rapid growth in retail loans to continue for another two quarters. What’s more, it has managed to keep it non-performing assets under control through the current slow down. Its NPAs fell a notch to Rs1,841 crore from Rs 1,894 crore. On the downside, net interest margins went down to 4.1% from 4.2%. NIMs are the difference between interest earned and interest spent. Shares of the lender climbed 3% on the BSE to 491.10 on a day the Sensex gained 2%.
Finance minister Pranab Mukherjee has made it clear he’s much less optimistic about growth this fiscal. He said the government would have a hard time meeting its current fiscal deficit target of 4.6%. He added that GDP growth may not reach the 8% level. Mukherjee blamed high oil prices, volatility in commodities costs. He also said RBI’s campaign of monetary tightening had taken its toll.