Financial Daily from THE HINDU group of publications
Monday, Dec 01, 2003
Financial Daily from THE HINDU group of publications Monday, Dec 01, 2003 |
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Public Sector Banks Money & Banking - Public Sector Banks Banks losing hope of returning capital to Govt Sarbajeet K. Sen
New Delhi , Nov. 30 PUBLIC sector banks that had earlier this fiscal put in proposals to the Ministry of Finance for trimming their equity base by returning part of the capital to Government are losing hope of an early decision on this issue. In fact, after a wait of over six months holding the sack of currency at the doors of the Finance Ministry, chiefs of PSU banks have begun to doubt whether they would be permitted to reduce their capital base through this route. "I feel there must be some opposition from within the Government on the need for banks to return capital. In any case, I do not expect an early decision on the issue," the Chairman and Managing Director of a public sector bank whose proposal is pending with the Government said. Among the banks that had come out with plans to return equity are Punjab National Bank (PNB), Oriental Bank of Commerce (OBC), Bank of Baroda (BoB), Indian Overseas Bank (IOB), Bank of India, Syndicate Bank and Andhra Bank. The proposals mooted by the banks got stuck for all these months on the crucial issue of pricing of the capital to be returned. The decision on the pricing mechanism has to be taken by the Ministry in consultation with the RBI. With the banks listed in the stock markets, the pricing of the return is expected to have a major impact on the price of scrip. Thus, if the Government decides to charge a premium on the returned capital it could lead to slide in the price of the shares while return at par could result in a major upward swing. "I do not know the Government's mind on this matter. I am also not much worried about it since we have the ability to service our entire capital," the chairman of another bank said. He said that the industry is hoping to hear something on the matter only after the Securities and Exchange Board of India (SEBI) submits its report on the volatility issue in bank scrips in May.
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