State Bank of India (SBI) and Punjab National Bank (PNB) are likely to be among the first batch of public sector banks (PSB) to raise funds this fiscal by tapping the capital market and offering shares to retail investors, financial services secretary G S Sandhu indicated on Friday. Mopping up of capital through this means is expected to help PSBs meet Basel-III norms of capital adequacy.
However, he added that discussions in this regard are still on and a final decision is yet to be taken.
Besides, PSBs are looking at hiving off non-core business, including insurance business to raise capital. The insurance joint ventures of PSBs, which are not listed, will be listed as it would bring in money to the bank. If the bank is not able to list, it can sell its stake or hive off to raise funds over a period of five years, he added.
PSBs are also considering monetising their real estate assets, Sandhu said, adding Bank of India has already approached the RBI for permission to monetise its realty assets.
On PSBs raising funds by tapping the capital market, he said, “We have to look at the share value and what is the likelihood of it going up. Some banks like SBI are getting good valuation. The price to book value (ratio) of most banks is below one. We would like it to be a little higher.”
“If more retail investors hold shares, it will lead to greater financial discipline as well as more transparency,” he added.
In his Budget speech on Thursday, finance minister Arun Jaitley had said that to be in line with Basel-III norms there was a need to infuse R2.4 lakh crore as equity by 2018 into PSBs. To meet this huge capital requirement, he said, it was important to raise additional resources.
While preserving the public ownership, with government holding at least 51%, the capital of these banks will be raised by increasing the public shareholding in a phased manner via sale of shares through retail to Indian citizens, he said.
In PSBs, the government's equity holding is between 56.26% to 88.63%. In SBI, it has 58.6% stake, while in PNB, it has 58.87%.
Sandhu said a strategy will soon be put in place to dilute government stake in all PSBs and bring it down to 51% in five years. All PSBs are likely to raise a total of around