Finance ministry advise state-run banks to exit non-core businesses
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New Delhi: As part of a capital raising exercise, the finance ministry has advised state-owned banks to prepare a list of their non-core assets and look at disposing them at an opportune time. They have been asked to move forward on the idea based on deliberations at the Gyan Sangam held last year, people in knowledge with the matter said.
Some of the banks have started the process while others are gearing up, they said, adding that the move will not only help them raise the much needed capital for growth but also sharpen their focus on the core business.
Most public sector banks (PSBs) have insurance ventures or capital advisory firms, besides holding stake in financial institutions such as stock exchanges. For instance, State Bank of India (SBI) holds stake in various companies including National Stock Exchange (NSE), UTI, Asset Reconstruction Co. (India) Ltd (ARCIL) and so on.
SBI has expressed intension to pare its stake in some of the subsidiaries including life insurance firm.
Last month, the board of IDBI Bank Ltd also approved dilution of stake in some non-core businesses to shore up capital base. The board of the bank has approved in-principle the proposal to divest some of its non-core investments subject to compliance with all applicable laws and regulations and final approval obtained for each transaction, IDBI Bank had said.
As part of the disinvestment exercise, IDBI Bank may look at bringing down its stake in companies such as IDBI Federal Life Insurance Co. Ltd, IDBI Capital Market Services, IDBI Intech Ltd, IDBI Asset Management Company, National Stock Exchange, National Securities Depository Ltd, and NSDL E-Governance Infrastructure Ltd.
According to finance ministry estimates, PSBs will require Rs1.8 trillion in additional capital over a period of four years ending March 2019. Of the total, they are expected to raise Rs1.1 trillion from the market and through the sale of non-core assets.