Double bonanza for Public Sector Banks? What is it? Yes from negative side. On one side the advances fall terribly and on the other daunting Capital Adequacy of banks…. Alas
- In a period of two decades, PSBs saw their Advances falling by Rs. 1.35 lakh crore in the FY 17. The fresh loan portfolio had a rise of Rs. 1.34 lakh crore in FY 16.
- On the other side the Capital Adequacy ratio of these banks fell by 40 per cent, and was half of that of the listed NBFCs.
- It may be noted that every Rs. 100 worth of advances of a Public Sector bank is backed by Rs. 10.4 worth of core capital or net worth during FY 17 whereas the corresponding numbers of Private Sector Banks and listed NBFCs were Rs. 17 and Rs. 21.4 respectively. Thus the low Capital Adequacy has crippled them to go for fresh loans.
- Taking advantage of the slackness in PSBs extending fresh loans, Privte Sector Banks and NBFCs have been released loans and thus increased their loan books considerably.
- Private Sector banks made fresh loans worth Rs. 2.6 lakh crore in FY 17 which was more by 1.86 lakh crore in FY 14. Also the NBFCs during the same period ensured to increase their loan portfolio by double, which was 1.3 lakh crore last fiscal year against 66,000 crore in FY 14, which is amazing.
- Experts opine that inability to maintain the capital adequacy and piled up NPAs have been responsible for the downfall of the PSU banks.
- Further, it is learnt that companies with good ratings are shifting their debt from banks to the bond market, which reduces the PSBs loan portfolio.
- By and large market analysts are not comfortable with the future prospects of PSBs.