No desire to reduce stake in PSU banks: Govt

Government today said it has no desire to reduce its stake in public sector banks at "current valuation". "Do not see any need to reduce stake in PSBs as of now... It is undesirable to reduce stake in PSBs at current valuation," Minister of State for Finance Jayant Sinha told a private news channel.

The Union Cabinet had recently decided to reduce the government stake in the 27 PSBs down till 52 per cent as against the current red line of 56 per cent. In the recently released Financial Stability Report, the Reserve Bank had flagged concerns over the compressed share prices of the state-run banks. "Capital raising efforts by PSBs other than the capital infusion by the government, face challenges because of their relatively low equity valuations compared to their private sector peers," it had said. The need for dilution has arisen as a result of higher capital requirement for meeting the Basel-III norms by April 2019 and an overall pressure on government finances.

The government has a Rs 11,200 crore capital infusion budget for the current fiscal and speculation is on whether the government will exceed this given the needs of the banks. That issue apart, Sinha said that Non Performing Assets in PSBs are at "unacceptably high level". Total Gross NPAs of public sector banks stood at over Rs 2.43 lakh crore as on end- September 2014. The top 30 NPAs account for Rs 87,368 crore ie 35.9 per cent of total gross NPAs of PSBs. Sinha further said that the government does not want any nterference on working of PSU banks, and stressed upon the need to professionalise their management. 


Read more about: psu banks
Story first published: Monday, January 5, 2015, 18:35 [IST]
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