RBI: PSBs have to work out their own capital raising options

The Centre bringing down its stake in public sector banks (PSBs) to 52 per cent is not sufficient to meet their capital needs.

And, PSBs need to work out their own capital raising options over the next five years, R Gandhi, Deputy Governor, Reserve Bank of India, said here on Saturday.

With Basel-III norms in place, Indian PSBs are expected to need Rs 4.50 lakh crore, with Rs 2.40 lakh crore as equity capital.

The Basel-III capital framework has been implemented in the country from April 1, 2013.

According to Gandhi, the projections are made on the basis of minimum requirements and hence are not necessarily sufficient to meet capital needs.

The Centre has already infused nearly Rs 58,600 crore in PSBs over the last four years and will provide around Rs 11,200 crore this fiscal.

Charting out capital requirement plans could include options such as non-voting rights share capital and differential voting rights share capital, among others.

“Recently, it has been reported that the GoI is contemplating scaling down their holdings on PSBs to 52 per cent. This may not be sufficient to fully meet the capital needs of PSBs under Basel III norms….” he said during his address at the ‘Indian PSU banking industry: road ahead’ summit; organised by the BCC&I.

Relooking p ortfolios

PSBs, Gandhi maintained, need to look at their portfolios. Currently, the portfolio is skewed in favour of industries accounting for over 46 per cent.

Exposure to the agriculture and services sector accounts for nearly 14 per cent and 21 per cent; while for retail and other services it is 16 and around 3 per cent respectively.

“They (PSBs) will need to rebalance this from the perspective of diversification,” the Deputy Governor, said.

The retail products portfolio too needs to be looked at, especially when there are a greater number of people with higher disposable income.

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