Home > Industry > Banking > PSU banks are adequately capitalised to stand on their own: CEA Subramanian
CEA Krishnamurthy Subramanian
CEA Krishnamurthy Subramanian

PSU banks are adequately capitalised to stand on their own: CEA Subramanian

  • The Budget's decision not to recapitalise the PSU banks is a good move, said CEA Krishnaswamy Subramanian
  • PSU banks must enhance the governance and tap into the market, said CEA

New Delhi: The PSU Banks may see enhanced profits with write-back of some of the loans provisions in their balancesheets on account of the IBC resolutions and they must now tap the market themselves instead of looking for recapitalisation, Chief Economic Advisor Krishnaswamy Subramanian has said.

"The Budget's decision not to recapitalise the PSU banks is a good move and signals that all the banks are adequately capitalised at this point. The Judgement on Essar Steel provides greater clarity on the IBC. State Bank of India profits were boosted by Essar Steel IBC resolution. Some of those accounts which have been fully written down by banks, when they get resolved, there will be a write-back on account of the resolutions. And this will enhance their profitability and also have an impact on their growth capital. That's one aspect the government clearly believes that these banks are adequately capitalised.

"So having all the while supported the banks when they needed support, now government wants them to stand on their own, enhance the governance and tap into the market," Subramanian told IANS.

State Bank of India reported a 41% year-on-year (y-o-y) rise in its net profit during the December quarter to 5,583 crore, which was driven by healthy income from retail loans and an 11,000-crore recovery from Essar Steel, following its sale to ArcelorMittal.

Finance Minister Nirmala Sitharaman said in the Budget that government so far has infused 3.5 crore capital into public sector banks (PSBs) to help them maintain regulatory capital requirements and finance growth plans. In the last Budget, the government had infused 70,000 crore.

"We have infused 3.5 crore capital into PSU banks. A few among them will be encouraged to move capital market for fundraising purposes", she said in her Budget Speech.

Finance Secretary Rajeev Kumar had earlier said banks have to tap the market and government would start gradually lowering its stake from the state lenders. In some of the state run banks, government stake nearly touches 100%.

Recently Punjab National Bank got board approval to raise 1,000 crore from market through bonds. The IDBI Bank also proposes to raise 1,500 crore from bonds to fund growth.

Among all four anchor banks, the Punjab National Bank was given 16,091 crore, Union Bank of India 11,768 crore, Canara Bank 6,571 crore and Indian Bank 2,534 crore. Merging entities, like the Allahabad Bank, was provided 2,153 crore, while the United Bank of India got 1,666 crore and Andhra Bank 200 crore.

Besides, the Bank of Baroda got a capital infusion of 7,000 crore, Indian Overseas Bank 4,360 crore, UCO Bank 2142 crore, Punjab & Sind Bank 787 crore and Central Bank of India 3,353 crore.

State Bank of India has already initiated the process of diluting stake in its subsidiary SBI Cards and Payment Services Ltd., and UTI Asset Management Co. Ltd. via planned initial public offerings. It is looking to sell 50 lakh shares representing 1.01 per cent stake in the National Stock Exchange. Life Insurance Corporation of India-controlled IDBI Bank too received additional capital of 4,557 crore through the first supplementary demand for grants approved by the Parliament last month.

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