New Delhi, Oct. 31: Buoyed by good half-yearly results from state-run banks, the finance ministry has cleared maiden stock flotations by Bank of Maharashtra and Punjab and Sind Bank.
Banking secretary . S. Sisodia said, “These two banks propose to come out with initial public offerings (IPOs) in the current financial year.” Punjab and Sind Bank officials said the bank’s IPO was likely to hit the market by December. It would be for a total value of Rs 100 crore to shore up the bank’s capital base to meet capital adequacy ratio, they added.
The bank is still saddled with a high net non-performing asset (NPA) level of over 10 per cent. However, as most of the bad loans have been made to small manufacturers and exporters in northern India, bank officials are confident that they will be able to recover large sums “as manufacturing in the north is once again picking up”.
Sisodia claimed that net NPAs of all public sector banks fell and Oriental Bank of Commerce had attained a zero NPA level.
Till now, Uco Bank, Vijaya Bank and Indian Overseas Bank (IOB) have tapped the market. While Uco mopped up Rs 240 crore charging a premium of Rs 2, which was oversubscribed 19 times, Vijaya and IOB charged a premia of Rs 14 a share.
Sisodia said the banking sector's advances were also growing. Besides growth in retail sector lending, banks and financial institutions had increased exposure to cement, steel, textiles and chemical firms, which were currently in focus “with better results”.
He said financial institutions like Industrial Development Bank of India (IDBI) would be restructured this fiscal “in a manner which will place minimal financial implications, if any, on the government.” This is possible because financial institutions were performing better due to an overall improvement in the economy, he added. Sanctions by IDBI had shot up 205 per cent to Rs 2,567 crore in the first half of 2003-04 compared with the year-ago period. All financial institutions together reported an increase of 137 per cent in sanctions to Rs 12,277 crore.
An IDBI study of 600 firms to which it had given loans showed that interest expense as a percentage of net sales declined 14.8 per cent and net profit increased 222 per cent to Rs 2,096 crore.
Meanwhile, a Crisil study released today also predicted a rise in gross domestic product growth by 7.1 per cent, but warned that the fiscal deficit might shoot above pre-planned limits to 5.8 per cent.
Fiscal deficit rose 40 per cent in the first six months of the current fiscal to touch Rs 81,014 crore compared with Rs 57,746 crore in the corresponding period last year.