Government not to dilute its shareholding in PSU banks: FM

Tuning into FM: PSU bank chiefs in a meeting with Chidambaram

UNION finance minister P Chidambaram on Tuesday assured the public sector banks that the government would not dilute its shareholding pattern in state-run banks. "There will be no dilution of government's shareholding," Chidambaram told reporters after meeting with the CMDs of the public sector banks. The minister pointed out that there is marked difference today between...
the book value and the market price of PSU bank shares. The government had earlier maintained that it would keep its stake in state-run banks at 58 percent. Chidambaram said the bank boards would decide on whether to raise capital from the markets through qualified institutional placement (QIP) or other routes. "Whether, in addition to what government infuses, a bank wants to take the QIP route or wants to make a rights issue, it is for the bank's chairman to take a call," the minister said. 
The minister also said that government would infuse the budgeted Rs 14,000 crore for PSU banks to improve their capital base and promised another share during the fourth quarter of the current fiscal. "Rs 14,000 crore will be allocated today and then of course we will sit down with the RBI and Sebi (to decide) the manner of infusion," Chidambaram said.

The meeting held threadbare discussion about the rising volume of non-performing assets (NPA), or bad loans, in the PSU banks. Finance minister said the government is closely monitoring the top 30 NPA accounts in each PSU bank. These banks have been asked to set up separate verticals to recover money from written-off accounts.

"It is a matter of concern that it is the big borrowers (with loans of over Rs 1 crore) who are defaulting," he said, adding that the situation was not as bad as it was in 2000, when gross NPAs touched a high of 14 percent. "Banks have been advised to empower or set apart an officer of senior rank, at least of general manager rank, to look at recovery, especially recovery from written-off accounts ...We will try to recover as much as possible from the written-off accounts," the minister said.

As of June, the gross NPA of the nationalized banks was 3.89 percent and that of SBI group at 5.50 percent.

The finance minister said PSU banks will open 10,000 new branches and set up 34,668 on-site ATMs during the current financial year. Chidambaram said banks have raised around $9.6 billion through the new non-resident deposit scheme.

Nation’s largest public sector lender State Bank of India, which plans to raise Rs 8,000 crore through the QIP route, will take a call by next month. "We will take a decision on the QIP within a month," said Arundhati Bhattacharya, chairperson, SBI. The government currently holds 62.31 percent stake in SBI.

However, the finance minister is happy over credit growth by PSU banks in the first and second quarters of the current financial year and expressed hope that it will remain "satisfactory" in the remaining part of the fiscal. Chidambaram said since April 2013, 173 new projects with an investment of Rs 250 crore and above have been cleared or are at various stages of clearances. These projects are with a total investment of Rs 3.24 lakh crore.