Kalia_Test Posted August 5, 2015 Posted August 5, 2015 So the annual comedy show of PSU Bank recapitalization has started link So, our tax money and savings from the fall in international crude oil prices will be used to recapitalize the utterly inefficient Public sector Banks that now have NPAs ranging from 4% to even 6%. Most Public Sector Banks are close to going bust and they are holding onto whatever Capital they have tightly i.e they have simply cut off lending and parking money with RBI ( source RBI website data ). Why the hell do we incentivize mediocrity? There is no pressure to perform for these Bank Managements and their stocks are trading below Book value in all cases except SBI I think. So they can't even borrow from market through equity dilution easily ( and there is this issue of Govt being stubborn to retain their % holding so any dilution would need the Govt to shell out huge money ). What happened to the Bank Holding Company proposal or retaining majority voting rights without majority equity concept. Private Banks are trading from 2 times to even 5 times book as their shareholders make the management accountable. So Govt divests its stake ( as part of its divestment program ) in say Coal India, NTPC, BHEL,etc , gets money and gives it to PSBs who in turn lend to dubious entities and makes the capital vanish :banghead: I know it is a rant but I am really angry. Priority sector lending, etc can all be achieved through many means - The Govt DOES NOT HAVE TO own so many Banks and keep pumping money into these inefficient beasts.
Kalia_Test Posted August 5, 2015 Author Posted August 5, 2015 On second thoughts - This may not fit in Political Section as pumping money in PSBs was done by all Govts in past so not fault of any single party. Mods can move it to Chitchat section :nice:
amiret Posted August 5, 2015 Posted August 5, 2015 Recapitalization of the PSB's was not unexpected as they have been talking about it for over a year. This new Socialist bailout is around 70,000 CRORES. Yes , all Govt's have dumped money into inefficient , incompetent PSB's AND this Govt is no different. The Govt will keep kicking the ball down the road or accede to the requests of the PSU Bank chairmen made last year . Last year they requested the Govt to create an ARC (Asset Reconstruction Company ) behemoth which can buy up all their bad assets and clean up their balance sheets. PSU Banks have been dumping their bad loans onto ARC's in which they hold equity stakes.
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