The dilution of government equity to 52 per cent in state-owned banks under the recapitalisation plan can fetch valuation much higher than the estimated potential of Rs 58,000 crore, says a report.
"As PSU banks have been given over-weightage following the government announcement of capital infusion, their valuations have already gone up.
"...This would surely mean, that if the banks are able to encash the sweet spot, they can easily raise much more than Rs 58,000 crore," industry body Assocham said in a report today.
It is said to the extent, the market is ready to give a premium on the PSU banks, notwithstanding some profit-taking, post October 24, the government can then tweak the projects bonds and reduce their size below Rs 1,35,000 crore, bringing down the interest burden on the budget and avert pressure on the fiscal, according to the report.
Besides, the chamber also said that once the uptick in lending resumes, there would be consequent advantages by way of higher economic growth and tax buoyancy.
Last week, the government unveiled an unprecedented Rs 2.11 lakh crore two-year road map for strengthening NPA-hit public sector banks, which includes re-capitalisation bonds, budgetary support, and equity dilution.
The programme entails mobilisation of capital, with maximum allocation in the current year, to the tune of about Rs 2,11,000 crore over the next two years, through budgetary provisions of Rs 18,139 crore, and recapitalisation bonds to the tune of Rs 1.35 lakh crore.
The balance will be raised by banks from the market by diluting government equity. The government's equity dilution will help banks to raise about Rs 58,000 crore. The government equity, as per the current policy, can come down to 52 per cent in state-owned banks.
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