Nudged by the finance ministry, public sector banks are planning to sell their stake held in various subsidiary companies in order to monetise their non-core assets. The move is expected to bolster the banks’ capital adequacy while reducing the pressure of recapitalisation on the exchequer in future years.
At least three state-owned banks, Canara Bank, IDBI Bank and Punjab National Bank, have proposed to sell their stakes in subsidiary and other companies, and have obtained approval of their respective Boards for the same, government sources said. More banks are expected to follow on exiting from non-core assets.
Canara Bank plans to sell its stake in companies including Canbank Factors Ltd, Can Fin Homes Ltd, Canbank Computer Services Ltd and National Stock Depository Limited. The government has announced capital infusion of Rs 4865 crore in Canara Bank. Punjab National Bank, which received capital infusion of Rs 5,473 crore last month, has lined up stake sale in Principal PNB Asset Management Company and Principal Trustee Company Pvt. Ltd.
While announcing the capital infusion plans for banks last month, the government had asked the lenders to have board-approved policies on monetising their non-core assets, sale of vacant real estate and “exit from all strategic equity investment” in unrelated businesses. The government has also directed small PSBs to cut their corporate loan exposure to 25 per cent of their risk-weighted assets over the medium term and focus more on retail lending.
Besides Canara Bank and Punjab National Bank, IDBI Bank plans stake sale in National Stock Depository Limited and NSDL eGovernance Infrastructure Limited. IDBI Bank, which received the highest capital infusion of Rs 10,610 crore, has sold portion of its stake in SIDBI and CCIL for a total of about Rs 1,500 crore in the July-September quarter.
The finance ministry announced last month that eleven weak banks will be given a total of Rs 52,311 crore to maintain minimum capital requirement even as nine strong banks will get Rs 35,828 crore to pursue growth. The government expects capital infusion to result in additional credit deployment of Rs 5 lakh crore. A total of around Rs 1 lakh crore will be infused in the PSBs by March-end, which comprise Rs 80,000 crore via recapitalisation bonds, Rs 8,139 crore through gross budgetary support and Rs 10,312 crore of funds raised from the market.
Last October, the government announced a mega recapitalisation plan to inject Rs 2.11 lakh crore of equity in PSU banks — Rs 1.35 lakh crore through recapitalisation bonds, Rs 18,000 crore from budgetary resources and Rs 58,000 crore to be raised by banks from the market.