New Delhi, June 4: The finance ministry may consider selling part of its stakes in the State Bank of India and Punjab National Bank in the current financial year.
The ministry also wants state-run banks to aggressively sell bad loans to asset reconstruction companies to fall in line with the Basel norms as the North Block has decided to limit its infusion into state-run banks at about Rs 11,000 crore.
The government’s current holding in the SBI, the country’s largest lender, is 58.6 per cent. A divestment of 5 per cent will take it down to below 54 per cent. If the SBI decides to launch a follow-on offer, it could further reduce the government’s shareholding in the bank to near 51 per cent.
Officials, however, said it was not the intention of the government to give up a majority stake in any PSU bank at present and only a minority stake sale may be considered.
The PJ Nayak committee set up by the RBI has recently recommended that the government’s shareholding in banks should be cut to below 50 per cent.
The government’s holding in Punjab National Bank, the second largest PSU bank, is at 59 per cent and a sale of 5 per cent would reduce its holding to just over 54 per cent.
PNB shares today traded at Rs 996.30 apiece, up Rs 24.25, while SBI shares were up Rs 39 at Rs 2,682.30. A sale of 5 per cent in the SBI could fetch the government over Rs 9,600 crore at today’s price, while a similar float in PNB could earn nearly Rs 1,800 crore.
At the same time, officials said, there is a move by the SBI to set up a holding company for its shares in five subsidiaries or associate state banks.
As these banks, along with the SBI, need greater market capitalisation according to Basel III capital adequacy norms, the holding company could secure more funding by floating additional capital. The SBI, too, could sell some of its holding to earn funds for its capital adequacy.
Earlier, the SBI had merged the State Bank of Indore with itself and had toyed with the idea of forming a separate bank forged out of merging all SBI subsidiaries. However, these plans were later given up.
Sale of bad loans
Officials also said the government had asked public sector banks to sell bad loans in the current financial year to improve their financials.
Non-performing assets (NPA) of state-run banks rose to 4.44 per cent of their gross advances as on March 31, 2014 compared with 2.32 per cent at the end of March 2011.
Public sector banks have together put up for sale over Rs 25,000 crore of non-performing assets this year. Over Rs 9,000 crore worth of bad loans have been sold already.
According to officials, Asset Reconstruction Company of India Ltd (Arcil) could be strenghtened for this purpose. Sponsored by the SBI, IDBI Bank, ICICI Bank and PNB, Arcil is the biggest of the four active asset reconstruction firms.
Another alternative is to float yet another asset reconstruction company, the officials added.
The finance ministry is considering a proposal to set up a National Asset Management Company that may act as a nodal agency for taking over bad loans of banks and help revive sick units.
There is a proposal to form such an entity, for which public sector banks can jointly put in capital, sources said.
However, some ministry officials feel strengthening existing institutions may be a better idea.
Bankers have also asked the finance ministry to look at bank recovery norms as well as rules that allow them to declare defaulters as wilful, thereby choking fresh finance to their group firms till they pay off old loans.
Several high profile companies are among those which owe large amounts of money to PSU banks.
According to the All India Bank Employees Association (AIBEA), the country’s top 406 loan defaulters together owe PSU banks a whopping Rs 70,300 crore. The association alleges this list includes Kingfisher Airlines, Winsome Diamonds, Electrotherm India and S Kumars Nationwide.