nsucurrent.com
nsucurrent.com February 22, 2018


Shares of leading state-run banks fall after recapitalisation plan

26 January 2018, 02:14 | Ruby West

Rajnish Kumar chairman of the State Bank of India | Reuters

STATE BANK INDIA-CHIEF

To a query on why IDBI Bank is being given the highest amount of capital when the government had earlier announced its intention to privatise, Jaitley said "the original decision stands" but the government is waiting for the "appropriate time" to restructure IDBI Bank.

"We have announced recapitalisation of PSBs in October, 2017 to the tune of Rs 2.11 lakh crore over two years". In the current round, IDBI Bank got the biggest capital injection at Rs 10,610 crore. The government has also mandated each of the PSBs to have a stressed assets management vertical and monetise their non-core assets such as real estate to boost their capital adequacy.

In a report, S&P Global said that the Centre's move will provide banks with much-needed capital to begin cleaning up their balance sheets aggressively.

Analysts said that the injections were just one step in the long process to clean up India's bad debt, and that the lenders' final capital position will also depend on how they undertake the central bank's directive to take almost 40 large corporate loan defaulters to bankruptcy proceedings, which will likely involve haircuts on their loans.

"In the first tranche, safety would supersede growth as almost 60 per cent allocation is in favour of the 11 troubled banks under the PCA". While RBI has identified the main defaulters, about 50 major corporate behemoths some of whom have escorted Prime Minister Narendra Modi to the World Economic Forum at Davos, the reluctance on the part of the central bank to name and shame the defaulters allows them the leg space to get away without punitive actions.

While the logic for bank recapitalisation is fiscally strong, and indeed the only viable option, it's the manner and layout of the allocation that should ring a few alarm bells.




While pledging 880 billion rupees ($13.86 billion) in aid to state-owned banks on Wednesday, India's Finance Ministry also handed out a set of guidelines that it wants lenders to conform to that will help clean up the financial system.

"In case of PCA banks, they should be able to reach the regulatory capital requirement".

"There is no fiscal impact of bond issuance to banks", Mr. Garg said.

The government will issue recapitalisation bonds of 6-10 years maturity. But the programme goes beyond infusion of money as the ministry informed that the recapitalisation will be "accompanied" with reforms at public sector banks.

On similar lines, Allahabad Bank fell 3.21 per cent, 2.43 per cent and United Bank of India lost 0.27 per cent. Indian Bank, Syndicate Bank and Punjab National Bank were down more than 5 per cent, whereas Andhra Bank, Canara Bank, Bank of Baroda, SBI and Union Bank were down by 3 to 4 per cent.



Other News

Trending Now

Israel kills Palestinian sought in deadly shooting of rabbi
Jarrar's house was demolished, as was an adjacent house belonging to another member of his family. Rosenfeld said two police officers were wounded, one of them seriously in the fighting.

Singer Ed Sheeran announces engagement to childhood friend
Sheeran previously opened up about how Swift's annual party was when he and Cherry wound up having their first date. The pair attended Thomas Mills High School in Framlingham, and have been dating for around two-and-a-half-years.

Indian Supreme Court allows screening of controversial film Padmavat
The film tells the story of a 14th Century Hindu queen belonging to the high Rajput caste and the Muslim ruler Alauddin Khilji. The Karni Sena has also approached the film theatres in Hyderabad and threatened the cinema hall owners not to screen the film.

Senate vote scheduled for Monday to potentially end shutdown
According to media reports, senators will vote to end the shutdown with a short-term spending bill that would last three weeks. January 20 after senators ― most of the Democratic caucus and four Republicans ― blocked a four-week continuing resolution.

Tesla in autopilot mode crashes in California
The safety board did note in its report that the introduction of Tesla's Autosteer software had cut collisions by 40 per cent. Consumer Reports has suggested that Tesla change the name for autopilot to something less misleading.

House releases transcript of interview tied to Trump dossier
He said he was not aware of Steele paying any of his sources, while defending his methods of gathering information. In 2016, Steele later handed over his findings included in the dossier to the Federal Bureau of Investigation .

Fire Breaks Out In Delhi Plastic Factory, Atleast 10 Killed
In a tweet, Prime Minister Narendra Modi said that he was "deeply anguished" by the incident. "Several casualties reported. The fire official said they have contained the blaze but rescue operations are still on.

Acer Debuts Stylish Convertible Acer Chromebook Spin 11 at Bett 2018
It features a spill-resistant keyboard which can handle 330 ml of liquid, and is compliant with the MIL-STD 810G specs. Will be sold via our retail channels, available in North America starting in March priced starting at $349USD.

WhatsApp launches 'WhatsApp Business' to target small business
WhatsApp Business, however, is meant to open a new channel of communication between businesses and their customers. The SMEs will be able to share their business description, email, website, and store addresses of their customers.

USA Gymnastics statement regarding Board of Directors Executive Leadership
Raisman spoke for nearly 12 minutes, not only going after Nassar but going after USA Gymnastics and the U.S. Miller asked the judge to go over and above the sentencing guidelines of 60 years in prison .