 "Bank of India")
The Centre is planning to disinvest a 5-10 per cent stake in public sector banks where it holds more than 80 per cent equity, The Economic Times (ET) has reported. People familiar with the development told the newspaper that a detailed roadmap will likely come up soon. As things stand, the government has over 80 per cent ownership in six banks: Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, and Uco Bank.
According to the ET report, the government wants to benefit from the rally in the share prices of public sector banks (PSBs). These banks have done well due to their improved financial performance.
The Nifty PSU Bank index has risen 34 per cent this year, compared to 6.9 per cent for the Nifty Private Bank index. The benchmark Nifty 50 index rose 6.4 per cent during this period.
Bank of India (BoI) is the biggest of these six banks, and a 10 per cent stake sale in BoI at its current market value can bring Rs 4,400 crore, according to The Economic Times. Besides, the government is also planning to exit IDBI Bank, which is now considered a private sector bank.
Government holding in public sector banks
According to a report published in Mint, the government can raise Rs 28,000-54,000 crore by decreasing its stake to 26 per cent in two of the six banks mentioned earlier. The government can raise much more money if it decides to sell its stakes in larger public sector banks. A case in point is the State Bank of India; 6 per cent of SBI stake can fetch the government Rs 31,395 crore, the report said.
Assets of public sector banks
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Supported by a healthy growth in loans and advances, public sector banks have seen their assets grow at 9.1 per cent in 2022-23. The Central Bank of India and Indian Overseas Bank registered a 20 per cent growth in their loans and advances. Bank of Maharashtra was at the top in terms of highest growth in total assets, the Mint reported.
Improved margins and shrinking NPAs
Banks are also reporting an improvement in net interest margin (NIM). This measurement compares the net interest income generated from credit products like loans and mortgages with the outgoing interest a lender pays holders of savings accounts and certificates of deposit (CDs).
PSU banks registered 29 basis points in their NIM growth during 2022-23. For the first time, the total net profit of public sector banks crossed Rs one trillion in 2022-23, up 57 per cent from the previous financial year. SBI accounted for about 50 per cent of these profits.
PSBs were also helped by the reducing non-performing assets (NPAs). Controlling the NPAs has been the focus of the government’s 4R strategy of recognition, resolution, recapitalisation, and reforms.
