Demonetisation windfall for banks After SBI, FPO, other PSBs like Bank of Baroda, IDBI Bank to hit market

The increase in bank deposits, after demonetisation has resulted in stepping up lending and improving their non-performing asset (NPA) ratios.  A bunch of public sector banks are looking to tap the market to increase their capital base during the first two quarters of the next financial year.  Closely following the announced follow-on public offer of the State Bank of India in June quarter, Bank of Baroda and IDBI Bank could too raise capital via QUALIFIED INSTITUTIONAL PLACEMENTS (QIP).

Further, it is learnt that the department of financial services and the Reserve Bank of India are working separately on the capital requirement of PSBs in the current circumstances.  It is expected that NPA ratios of PSBs would decline going forward as banks, flooded with deposits after demonetisation, have increased their lending and the improvement would help them tap market for capital.

SBI, whose FPO has been in the pipeline for about two years, could finally tap the market after merger of its five associates and Bharatiya Mahila Bank with itself by March-end. Further, with 22% share of bank loan assets in the country, SBI is best suited for public offer to raise growth capital at this juncture, the official added.

SBI is also the biggest beneficiary under the R70,000-crore capital infusion in PSBs by the government under MISSION INDRADHANUSH between FY16 and FY19. It has got R13,106 crore or 27% of R48,000 crore that the Centre has infused in 19 PSBs since the previous fiscal year. Unlike other PSBs, SBI got capital for growth while most others used the funds to meet the capital adequacy norms.

With high NPAs making bank stocks less attractive, PSBs have raised very little as against the projected mobilisation of R1.1 lakh crore via this route in the four years from FY16. So, SBI’s earlier plan for QIP has been dropped for now to give way to other PSBs to tap the route including BoB and IDBI Bank. The government had given its nod some time ago for a R3,771-crore QIP of IDBI Bank. IDBI’s earlier attempts could not succeed due to lack of hunger among investors after NPAs rose in the banking sector.

The amount of Rs. 14.5 lakh crore of the old 500 and 1000 rupee notes as on December 30, 2016 received by RBI is said to be around 94% of the Rs. 15.44 lakh crore put out of circulation on November 8 last year.

Author: Admin Bankedge

No Comments

Post a Reply