28.2 C
Delhi
Monday, October 19, 2020

Huge recaps in PSB failed to push credit growth: IndRa

- Advertisement -

Huge recaps in PSB failed to push credit growth: IndRaMumbai, Aug 8 (IANS) The recapitalisation of public sector banks (PSBs) by the government has not contributed to credit growth, rating agency India Ratings said.

The government has infused huge capital in PSBs but they have largely been used to mitigate losses and has failed to contribute meaningfully to credit growth, it said.

Between FY14-FY19, the government and Life Insurance Corporation (LIC) together infused Rs 3 lakh crore into PSBs. However, from the value creation objective, the scenario looks bleak.

The current market value as on July 29, 2019 of government and LIC’s stake was Rs 4.4 lakh crore (FY14: about Rs A2.2 lakh crore). The increase in market capitalisation over FY14 is significantly lower than the capital infused.

Nine of 19 PSBs reported current value of investment higher than the investment amount. The key banks among them are Indian Bank (INDIAN; aIND AA+’/Stable/’IND A1+’), State Bank of India (SBI; aIND AAA’/Stable), Bank of Baroda (BOB; aIND AAA’/Stable/aIND A1+’) and Canara Bank (CAN; aIND AAA’/Stable).

Over the years, the market share of PSBs in incremental credit generation shifted to other market participants including private banks, foreign banks, non-bank financial companies, housing finance companies and mutual funds, the report said.

The sharp deterioration in asset quality in the last few years led to accelerated provisions among all PSBs. This caused banks to suffer massive losses, which in turn led to failure in meeting objectives of the Indradhanush Scheme such as recapitalising banks based on their performance and their ability to support credit expansion.

In reality, the capital infused was largely consumed to tide over losses resulting from provisions required on non-performing assets, Ind-Ra said.

The market share of PSBs fell to 46.5% in FY19 from 60.9% in FY14. More importantly, in terms of incremental credit, the share of PSBs has been 26.2% over FY14-FY19.

The objective of nationalisation of banks included financial inclusion as the primary objective, along with increasing availability of credit to priority sectors such as agriculture and small and medium enterprises (SMEs).

Due to stress of bad corporate loans in the system, the incremental credit to agricultural and SMEs segments by PSBs has been only 1.3x-1.5x of incremental credit to agricultural and SME segment by top 6 private banks (by the size of its assets) i.e. significantly lower than the share of PSBs in the banking system.

Anecdotal evidence suggests PSB’s share in funding direct small ticket lending to agri and other priority sectors still remains high, it said.

Recapitalisation is a prompt response to infuse funds in cash-strapped public sector banks. The capital infusion by the government in PSBs may ensure banks’ solvency but may not necessarily ensure stability and growth in the absence of non-financial and structural reforms.

India Updates
India Updates is an independent news & Information website. Follow us for regular updates on News and Information.

Follow Us On

Related News

Modi govt receives 213 proposals to end rural water woes

New Delhi, Oct 19 (IANS) The Centre has received a whopping 213 proposals from various Indian tech start-ups, MSMEs, companies and LLPs for a challenge...

Musk one step closer to beam cheaper Internet with Starlink

Washington, Oct 19 (IANS) Elon Musk-run SpaceX has launched 60 more Starlink satellites aboard Falcon 9 rocket to be deployed in low-Earth orbit, bringing...

Xiaomi announces industry-leading 80W wireless charging

Beijing, Oct 19 (IANS) Chinese brand Xiaomi on Monday said it is working on the industry-leading wireless technology that will fully charge the battery...

All guns blazing: Sidhu slams Cong govt, Centre on agriculture

Chandigarh, Oct 19 (IANS) On the eve of introduction of a state Bill in Punjab Assembly to negate 'anti-farmer' central farm laws, cricketer turned...

Corona is the new Mahishasura in Delhi’s subdued Durga Puja

New Delhi, Oct 19 (IANS) In times of the pandemic, evil has attained a new face — coronavirus. Hence, the Safdurjung Matri Mandir, an old puja...

Sitharaman tells central PSUs to scale up capex in FY21, FY22

New Delhi, Oct 19 (IANS) Stressing the need for capital expenditure (capex) by Central Public Sector Enterprises (CPSEs), Union Finance Minister Nirmala Sitharaman has said...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Trending Topics In India

Covid 19 India Updates

‘India can become global PPE hub, more R&D efforts needed’

New Delhi, Oct 18 (IANS) Within six to seven months, India has become a major manufacturer of personal protective equipment (PPE) kits and even...

‘India can become global PPE hub, more R&D efforts needed’

New Delhi, Oct 18 (IANS) Within six to seven months, India has become a major manufacturer of personal protective equipment (PPE) kits and even...

Bharat Biotech & Washington Univ developing nasal vax for Covid: Minister

New Delhi, Oct 18 (IANS) Union Health Minister Harsh Vardhan on Sunday informed that Bharat Biotech will develop an intranasal vaccine for Sars-CoV-2, the...

PM Modi says use poll experience for vaccine delivery system

New Delhi, Oct 17 (IANS) Prime Minister Narendra Modi on Saturday reviewed the Covid-19 pandemic situation in the country and the preparedness of vaccine...

Achievements in poverty reduction at risk due to Covid: FM

New Delhi, Oct 16 (IANS) Finance Minister Nirmala Sitharaman on Friday said that the the impact of coronavirus pandemic continues and the achievements in...

Mask & Movies: How cinema viewing changed in post Covid era

New Delhi, Oct 16 (IANS) After around seven months of complete closure due to the restrictions imposed due to the Covid-19 pandemic, movie theatres...

Trending News In India

Chinese soldier detained by India, adding to border tension

New Delhi, Oct 19 (IANS) India has detained a Chinese soldier in the Demchok sector in the disputed border in Eastern Ladakh. The soldier,...

Musk one step closer to beam cheaper Internet with Starlink

Washington, Oct 19 (IANS) Elon Musk-run SpaceX has launched 60 more Starlink satellites aboard Falcon 9 rocket to be deployed in low-Earth orbit, bringing...

Xiaomi announces industry-leading 80W wireless charging

Beijing, Oct 19 (IANS) Chinese brand Xiaomi on Monday said it is working on the industry-leading wireless technology that will fully charge the battery...

All guns blazing: Sidhu slams Cong govt, Centre on agriculture

Chandigarh, Oct 19 (IANS) On the eve of introduction of a state Bill in Punjab Assembly to negate 'anti-farmer' central farm laws, cricketer turned...

Corona is the new Mahishasura in Delhi’s subdued Durga Puja

New Delhi, Oct 19 (IANS) In times of the pandemic, evil has attained a new face — coronavirus. Hence, the Safdurjung Matri Mandir, an old puja...

Preparations to start soon for Haj 2021, says Centre

New Delhi, Oct 19 (IANS) The Centre on Monday said that Haj 2021 will depend on the national and international protocol guidelines in view...

Trending Showbiz

‘Laxmmi Bomb’ highlights transgender community, says director Raghava Lawrence

Mumbai: The horror comedy Laxmmi Bomb, starring Akshay Kumar, is all set to release on November 9, and director Raghava Lawrence, who makes his Bollywood...

BARC India remains committed to its stakeholders

Mumbai, Oct 18 (IANS) Broadcast Audience Research Council (BARC) India on Saturday released a statement underlining the fact that the body aimed at ensuring...

Cinemas reopen: Day one sees dull start, but trade experts positive

BY NATALIA NINGTHOUJAM (IANS) Cinemas in several states including Delhi-NCR opened doors to patrons on Friday after seven months the turnout everywhere has been...

Will thwart all attempts to finish off Bollywood: Thackeray

Mumbai, Oct 16 (IANS) Breaking his silence, Maharashtra Chief Minister Uddhav Thackeray on Thursday made it clear that he would resist any moves to finish off...

BARC to pause ratings of news channels

Mumbai, Oct 15 (IANS) Amid the ongoing TRP (Television Rating Point) scandal, Broadcast Audience Research Council (BARC) board is all set to review its...

Ravi Kishan wants separate Censor Board for Bhojpuri films

Gorakhpur (UP), Oct 14: Actor-turned-politician Ravi Kishan will now raise the issue of vulgarity in Bhojpuri films in Parliament and demand setting up of...

Trending Sports

KXIP crowned kings after beating MI in 2nd Super Over

Dubai, Oct 19 (IANS/GloFans) In a most dramatic contest, comprising two Super Over deciders, Kings XI Punjab (KXIP) held their nerve to eke out a...

Dhawan’s maiden ton takes DC to five-wicket win over CSK

Sharjah, Oct 17 (IANS) Shikhar Dhawan scored his maiden T20 century while Axar Patel knocked off the required 17 runs off the last over...

ABD magic takes RCB to 7-wicket win over RR

Dubai, Oct 17 (IANS) Royal Challengers Bangalore (RCB) on Saturday beat Rajasthan Royals (RR) by seven wickets, thanks to an unbeaten 22-ball 55 from...

Clinical Mumbai thrash Kolkata in a mismatch

Abu Dhabi, Oct 17 (IANS/GloFans) Maintaining their winning streak, reigning champions Mumbai Indians (MI) outclassed Kolkata Knight Riders (KKR) by eight wickets on Friday...

KXIP survive late choke to beat RCB by 8 wickets

Sharjah, Oct 16 (IANS): Kings XI Punjab (KXIP) survived an extraordinary late choke to end their run of defeats with an eight-wicket win over Royal...

Delhi back on top with 13-run win over RR

Dubai, Oct 14 (IANS) Delhi Capitals (DC) on Wednesday beat Rajasthan Royals (RR) by 13 runs at the Dubai International Stadium and climbed back...

Latest Trending News In India

Modi govt receives 213 proposals to end rural water woes

New Delhi, Oct 19 (IANS) The Centre has received a whopping 213 proposals from various Indian tech start-ups, MSMEs, companies and LLPs for a challenge...

Musk one step closer to beam cheaper Internet with Starlink

Washington, Oct 19 (IANS) Elon Musk-run SpaceX has launched 60 more Starlink satellites aboard Falcon 9 rocket to be deployed in low-Earth orbit, bringing...

Xiaomi announces industry-leading 80W wireless charging

Beijing, Oct 19 (IANS) Chinese brand Xiaomi on Monday said it is working on the industry-leading wireless technology that will fully charge the battery...

All guns blazing: Sidhu slams Cong govt, Centre on agriculture

Chandigarh, Oct 19 (IANS) On the eve of introduction of a state Bill in Punjab Assembly to negate 'anti-farmer' central farm laws, cricketer turned...

Corona is the new Mahishasura in Delhi’s subdued Durga Puja

New Delhi, Oct 19 (IANS) In times of the pandemic, evil has attained a new face — coronavirus. Hence, the Safdurjung Matri Mandir, an old puja...