The regulator’s apprehension is that privatisation may end up being an exercise similar to the one in the case of IDBI Bank, where Life Insurance Corporation of India had to take a controlling stake of 51 per cent from the government, said a person aware of the development. At a recent meeting, the RBI expressed its view that the government must reduce its stake to 26 per cent in PSBs.
But as that would take time, a timeframe has been suggested for stake sale in the leading PSBs.
A back-of-the-envelope calculation shows that stake sale in the six banks
could fetch over Rs 43,000 crore, though sources said Rs 25,000 crore had been targeted. Stake sale, with the government not participating in it, should help bring down its stake to 51 per cent.
“After the YES Bank crisis, investors are looking at PSBs
favourably and if we demonstrate our ability to operate profitably, we should be able to raise money on our own,” said a top executive of a PSB gearing up for capital raising.
According to the head of a foreign investment bank, enquiries for SBI and BoB have been rising. “But interests are not converting into ‘buy’ orders yet,” he added. Efforts are underway to boost the valuations of these PSBs because all, including SBI, are trading at far below their book value.
“Work is on to improve their asset quality,” said a banker. According to sources, the six banks
may not take on any lumpy credit exposure in the near term and will remain focused on cutting non-performing assets by at least a third by the end of 2020-21. “They will participate in the government’s credit guarantee schemes,” another highly placed source said. The Centre and the RBI are monitoring their asset quality.