PSU banks may shelve fresh public issues

The Indian Banks’ Association (IBA) has apprehended that several public sector commercial banks might shelve their fresh public issue p...

The Indian Banks’ Association (IBA) has apprehended that several public sector commercial banks might shelve their fresh public issue plans. The fear is despite the announcement by Prime Minister Manmohan Singh that the public sector banks can launch fresh public issues provided the government stake in these banks is maintained above 51 pc.

IBA sources said, a number of banks, who were intending to come out with fresh public offerings earlier to improve their capital adequacy ratio positions, are currently in two minds of whether to go ahead with their plan or not. Sources said, the main reason for their fear is the mounting pressure on the government by banking trade unions and Left parties. They are not only preventing the PSU banks from diluting fresh government stake but also insisting the banks to go for the gradual buyback of already diluted shares from the market. There are ample reasons why the Centre might succumb to the pressure, specially from the Left, since the present coalition gives ample scope to the Left to resort to arm twisting, they said.

In fact, Defence Minister Pranab Mukherjee before the election said that the policy of his party is not in favour of any further dilution of the government stake in PSU banks. He added that in case of those banks, where already certain amount of government stake has been diluted, the government would study these banks on a case by case basis and go for gradual buyback of such shares. “Now the banking trade unions and the Left might put pressure on the Centre to fulfill the party’s pre-election commitment,” an IBA associate said. It is learnt that a number of PSU bank top brass in different IBA forums have apprehended that if the government succumbs to the pressure and decides on gradual buyback of diluted shares, it will impose a tremendous financial burden on these banks.

Many banks who earlier intended for fresh public offerings might go slow on their plans unless the situation gets cleared completely,” the IBA associate said. But SBI chairman AK Purwar thinks the banks are competent enough to take their own decisions. Meanwhile, the unions are determined to carry on with their pressure on the Centre to ensure 100 per cent government stake in all PSU banks.

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