PSU banks rally 3-6% on hopes of early recapitalisation plan

Moneycontrol News

Shares prices of PSU banks rallied 3-6 percent on hope of early recapitalisation plan, including issue of recapitalisation bonds.

Syndicate Bank, State Bank of India, PNB, IDBI Bank, Bank of India, Bank of Baroda etc participated in the rally.

Finance Minister will make a major announcement likely on the recapitalisation plans for public sector banks at 4 pm today, as per CNBC-TV18 News channel.

On October 6, speaking at India Economic Summit, organised by World Economic Forum and Confederation of Indian Industry, Sanjeev Sanyal, principal economic advisor, had said that recapitalisation could be done in a few months.

“The first part of the clean-up, which is recognising the bad assets and taking some of them through the bankruptcy process, that part of the process is well underway… Now, the second part of it… which is the recapitalisation, will be done in next few months,” said Sanyal.

Bad loans in India grew to a massive Rs 11.5 lakh crore or 14 percent of total advances. As of March 2017, the percentage of non-performing asset (NPA) stood at 9.5 percent. It is expected to rise to approximately 10.5 percent by March 2018 as per Crisil, a rating agency.

Sanyal said that the government has various options in mind to sort out the banking mess, including recapitalisation and diluting the government’s stake.

“There are many options on the table, which range from creating recapitalization bonds, diluting down the government’s stake up to 52 percent, some assistance could come from budget itself,” he said.

He said that options will be explored in combination, but the recapitalisation issue was “well understood and would be done soon”.

The banking sector, with financial assets worth Rs 77.70 lakh crore, is capital-starved and has been pitching for government’s intervention for infusing capital.