Skip to main content

Public sector banks delay plans to raise capital

By
Public sector banks ( PSBs), which are starved for equity capital, are refusing to tap the markets to raise funds, despite having all the necessary approvals in place. State Bank of India ( SBI), Bank of India, United Bank, Oriental Bank of Commerce, Union Bank and IDBI Bank have had the permissions for more than a year or more but they have refrained from raising capital via the qualified institutional placement (QIP) route.
Arun Tiwari, chairman and managing director of Union Bank, points out that even though they have the approvals to raise ? 1,386 crore via QIP, they haven’t done it as yet because they do not need the funds now. “The credit growth in the system has been low and the areas that we are growing in don’t require as much capital. Therefore, the need for capitalraising hasn’t come yet,” he said.
The credit growth in the banking systemhas been in the range of 8.5- 11 per cent for almost two financial years now. And the PSBs, excluding SBI, seem to be the worst affected. According to Reserve Bank of India data, during the JanuaryMarch quarter, bank credit of PSBs — excluding SBI and its associates — grew by a mere 1.4 per cent, compared with 7.8 per cent in the corresponding period in FY15.
Another reason, experts point out, which is stopping the lenders from approaching the market is the stress on the balance sheet, which may deter potential investors. In fact in the last one year, the quantum of bad loans on the book of PSBs has close to doubled, with the tally of bad loans for the listed PSBs ( including SBI & associates) at ? 5.81 lakh crore at the end of March 2016, compared with about ? 3 lakh crore at the end of March 2015.
Bankers also admit that all this combined with the volatility in the market has also deterred them from entering the capital markets.
BS Rama Rao, executive director, Vijaya Bank, explained that the present share value of the bank is at a discount to its book value and therefore it may not be lucrative to raise capital now. “ It will make sense to tap the market when the price improves. The bank may look at raising equity capital from market at the end of the financial year,” he said.
Business Standard New Delhi, 03 June 2016

Comments

Post a Comment

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...
Post a Comment
Read more

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

By
  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024
Post a Comment
Read more

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

By
  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...
Post a Comment
Read more