Banking:
PSU BANKS TO GET A MUCH REQUIRED EQUITY INFUSION THAT WILL ENHANCE THEIR GROWTH
*Net market borrowings to be lower
*New branch licenses to be issued to private players and NBFCs
*Increase in allocated amount for capital infusion in PSBs
The finance minister announced that the RBI might give additional banking licenses to private sector players. This step can change the landscape of the banking industry as a host of Indian corporates like Tatas, Birla group, and some of the older NBFCs have shown interest in the banking business. Also, the government has announced a provision of Rs 16,500 Cr to augment Tier I capital of PSU banks, which is a positive trigger. The government’s estimated borrowing is expected to come down from Rs 3.97 lakh Cr in 2009-10, to Rs 3.45 lakh Cr in 2010-11. This substantially lowers the concerns of crowding out of private investment.
Impact: IFCI, Reliance Capital and IDFC might apply for banking licenses. The capital infusion measures may help Dena Bank, Vijaya Bank, IDBI and Bank of Maharashtra to increase their tier-I capital. In the near-term, banks with near 8% tier-I ratio (like UCO Bank, IDBI, Dena bank, CBoI, Vijaya Bank, Syndicate bank, IOB, Union Bank) likely to see capital infusion.
The six-month extension for repaying loans under the agri-debt relief scheme should benefit Bank of Baroda, PNB and Oriental Bank of Commerce.
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