PSBs look at QIPs to raise Capital

It is well known that Government had infused a sizeable capital amount in the Public Sector Banks, to revive them.  Now the PSU Banks are looking forward to go to capital markets since they are very confident of selling the products, effectively, after a three years period of bad loans cleaning up process.

  • QIPs (Qualified Institutional Placements) appears to be the most preferred choice for the lenders since they are under obligation to bring down Government holding to less than 75% in a period of two years.
  • The size of QIPs by State owned banks could be in the range of Rs. 19,000 to Rs. 32,000 crores as per ICRA rating and around 40-50 per cent of it could be of State Bank of India and the balance would be of the PSBs.
  • Many of them have also have had the board approval in place to raise Equity capital in their recent results or earlier.
  • Government had raised its holding in several banks like Allahabad Bank, UCO Bank and United Bank of India to above 90% in order to square up the bad loans.
  • Banks under the Prompt Corrective Action of Reserve Bank of India, adjusted the Government Capital against the bad loans in order to bring down the Non-performing assets (NPAs) below 6%).
  • The total capital requirement for PSBs is in the range of Rs. 49,000 crores to Rs. 72,000. These are based on low/high growth and extent of provision cover maintained by each bank, as per ICRA.
  • Further around Rs. 30,000 to Rs. 40,000 crores will be required to be infused by the Government and the balance of Rs. 19,000 to Rs. 32,000 crores are to be raised by PSBs from the markets.

Author: Admin Bankedge

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