PSU banks are amongst the major gainers in the markets today. Union Bank, Dena Bank, Bank of India among the major gainers. Dena Bank and Bank of Baorda have hit their respective 52-week highs.
Analsyts say that the banking stocks are very hot right now and as you saw yesterday even as the market could not hold on to its gains, PSU banks did very well. SBI has been leading this bull charge. Soem sentiment has also been boosted by the ECB curb announced by RBI to stem dollar inflows.
"The current move, though only pre-emptive in nature, follows a number of other steps that RBI has been taking to contain system liquidity. The move will also be supportive for loan growth and lending yields for domestic banks, since the alternative of ECB funding may, in some cases, be restricted or uncompetitive (where imports are costlier), "says a CLSA report.
Also PSU Banks may soon have access to greater foreign capital and more liquidity if their proposals to the ministry of finance are approved. The ministry is currently examining a proposal by PSU banks to permit splitting of stock and to raise the cap of FDI and FII holding in such banks to beyond 20%. The banks also want the finance ministry to relax the norms for payment of minimum dividend
Apart from the minimum dividend issue, chiefs of public sector banks have made a whole host of important suggestions to the finance minister in order to shore up their capital base and meet Basel II norms as well as the demands for more credit capital.
One suggestion that may be approved without much political controversy is the proposal to allow stock split so that banks can improve their liquidity and their market capitalization but what may not pass political muster is the proposal that banks be allowed to divest government stake in them to below 51% so that they have more headroom to raise capital, something that has raised a political storm in the past. Yashwant Sinha as finance minister had proposed that that minimum government holding be reduced to 33 % with the public sector character of banks being maintained, but there was opposition from the congress at that time. Most banks are also in favour of increasing the FDI/FII ceiling in PSU banks from the current 20%, a proposal that is still pending with the MOF
PSU banks seek capital but experts say PSU banks should raise tier ii capital, which is a politically safe way to raise funds. "If the govt loses control over the public sector banks because of dilution of govt stake, then it cannot meet social objectives & this is likely to face political opposition. So a better that action would be taken for these banks to raise tier ii capital from entities like GIC & LIC" says Sunil Sinha, Principal Economist at Crisil
Some banks have also suggested that PSU banks be allowed to raise capital by issuing non voting shares or shares with differential voting rights the banks have also requested the RBI to review the draft guidelines on meeting Basel II norms as that is putting pressure on the banks to raise more capital
On his part, the finance minister has already promised that the requirement of making a minimum payment of dividend shall be relaxed for PSU banks on a case-to-case basis. The ministry of finance in consultation with the RBI is now considering the rest of the suggestions.
Analsyts say that the banking stocks are very hot right now and as you saw yesterday even as the market could not hold on to its gains, PSU banks did very well. SBI has been leading this bull charge. Soem sentiment has also been boosted by the ECB curb announced by RBI to stem dollar inflows.
"The current move, though only pre-emptive in nature, follows a number of other steps that RBI has been taking to contain system liquidity. The move will also be supportive for loan growth and lending yields for domestic banks, since the alternative of ECB funding may, in some cases, be restricted or uncompetitive (where imports are costlier), "says a CLSA report.
Also PSU Banks may soon have access to greater foreign capital and more liquidity if their proposals to the ministry of finance are approved. The ministry is currently examining a proposal by PSU banks to permit splitting of stock and to raise the cap of FDI and FII holding in such banks to beyond 20%. The banks also want the finance ministry to relax the norms for payment of minimum dividend
Apart from the minimum dividend issue, chiefs of public sector banks have made a whole host of important suggestions to the finance minister in order to shore up their capital base and meet Basel II norms as well as the demands for more credit capital.
One suggestion that may be approved without much political controversy is the proposal to allow stock split so that banks can improve their liquidity and their market capitalization but what may not pass political muster is the proposal that banks be allowed to divest government stake in them to below 51% so that they have more headroom to raise capital, something that has raised a political storm in the past. Yashwant Sinha as finance minister had proposed that that minimum government holding be reduced to 33 % with the public sector character of banks being maintained, but there was opposition from the congress at that time. Most banks are also in favour of increasing the FDI/FII ceiling in PSU banks from the current 20%, a proposal that is still pending with the MOF
PSU banks seek capital but experts say PSU banks should raise tier ii capital, which is a politically safe way to raise funds. "If the govt loses control over the public sector banks because of dilution of govt stake, then it cannot meet social objectives & this is likely to face political opposition. So a better that action would be taken for these banks to raise tier ii capital from entities like GIC & LIC" says Sunil Sinha, Principal Economist at Crisil
Some banks have also suggested that PSU banks be allowed to raise capital by issuing non voting shares or shares with differential voting rights the banks have also requested the RBI to review the draft guidelines on meeting Basel II norms as that is putting pressure on the banks to raise more capital
On his part, the finance minister has already promised that the requirement of making a minimum payment of dividend shall be relaxed for PSU banks on a case-to-case basis. The ministry of finance in consultation with the RBI is now considering the rest of the suggestions.
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