PSBs to Make a Beeline for Stock Mkt After Cabinet Nod 10 banks submit plans to govt to raise nearly Rs 33,000 crore to meet capital requirements Leading state-run banks could start lining up to raise funds from the stock market just as the economy seems to be recovering, providing investors a chance to pick up shares and allowing lenders to raise capital to meet stringent Basel III norms. This follows the union cabinet’s approval for stake sales in such institutions on Wednesday as long as the government retains a minimum 52% holding. The finance ministry is set to chalk out a share-sale strategy for the banks, about 10 of which have submitted plans to the government to raise nearly Rs 33,000 crore to meet capital requirements. The list includes the country’s largest lender, State Bank of India, which has sought approval for raising . `25,000 crore over the next few years. Public sector banks could be among the biggest beneficiaries of economic revival, according to experts. Foreign investors would be interested in the public offerings given the wide network of these lenders and the possibility of consolidation that is one of the stated objectives of the government, they said.“We are in discussions with banks. The instrument, offer size and timing of the issue will be decided by the respective bank boards,” said a senior government official, requesting anonymity. The applications under review include those of IDBI Bank, which has sought approval for raising . `4,000 crore, and of Indian Overseas Bank for raising . `1,200 crore through the Qualified Institutional Placement (QIP) route. Public sector banks can raise up to . `1.6 lakh crore from the market if they are permitted to bring down the Centre’s holding to 52% in a phased manner, according to the government’s estimates. In this scenario, the government will have to provide budgetary support of . `78,895 crore in 2015-19 as part of the banks’ capital-raising efforts. “As the government is likely to receive an amount of . `34,500 crore from public sector banks as dividend, the net outgo will only be Rs 44,395 crore,” the government had said in a statement on Wednesday. Public sector banks require equity capital of . `2.4 lakh crore by 2018 to meet Basel III capital adequacy norms. For the current fiscal, the government has allocated . `11,200 crore for bank capitalisation.“The banks will be raising this amount over a period of five years or more,” said the official cited earlier, adding that the government’s stake will be reduced in tranches. “Each bank will tap the market as per their requirement.”
Posted on: Fri, 12 Dec 2014 11:17:51 +0000
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