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Banks still in dark on share recall

Mumbai, June 3: The finance secretary gave the policy somersault on the return of banks’ equity to the government a new thrust by denying a decision had been made.

Narayan’s statement belies indications from a finance ministry official, who said last week the government would not accept the return of equity at book value.

“No decision has been taken by the government on whether to charge a premium on the shares or to take it back at par,” the finance secretary said. The comment perked up bank shares, mauled on Monday over fears the Centre was adamant on its pound of flesh. That prompted many in the market to say it was the end of the “banking bubble” seen in recent months.

Punjab National Bank, which had slumped 20 per cent on Monday, shot up by over 7 per cent to Rs 154, Bank of Baroda was up by nearly 2 per cent to Rs 110.20 and Oriental Bank of Commerce jumped 3.5 per cent.

The confusion began when a ministry official pronounced last week that the government might charge public sector banks a mark-up if they return a part of equity. This came days after a spokesperson had held forth that no premium would have to be forked out.

Despite today’s rebound, analysts were not convinced investors would spare bank shares in the days ahead. “The sense of uncertainty on the equity buyback by the government will persist,” one of them said.

Nationalised banks, many of which are lining up public issues, have been scrambling to give back a portion of the government’s equity to boost their share value.

Punjab National Bank wants to pay back Rs 130 crore, Bank of Baroda (BoB) Rs 91 crore, Indian Overseas Bank Rs 50 crore and Andhra Bank Rs 50 crore. Oriental Bank of Commerce has also unveiled similar plans, though it has not put a finger on the amount.

During his visit to Mumbai today, Narayan reviewed the performance of UTI Mutual Fund, met Reserve Bank deputy governor Rakesh Mohan and senior State Bank of India officials. He said no decision on raising the FII stake cap in SBI has been taken.

On the cost of money, the finance secretary said the nominal interest rates are unlikely to change in the near future.

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