Good Days for PSU Banks

PSU Banks PNB and IDBI banks are planning not to sell any stressed loans to asset reconstruction companies (ARCs), as they expect to recover the money through some innovative ways. Newly-appointed PNB managing director and chief executive Usha Ananthasubramanian said selling bad loans to ARCs is not the only way to recover bad loans, there are more innovative ways to deal with NPAs than an outright sale to ARCs.

Similarly, IDBI Bank also said, the bank is not looking at approaching the ARCs to recover the bad loans. Both these banks have reported spike in bad loans in the past quarters. Both these banks are looking at new approach while dealing with NPAs.

The recent quarter performance of PNB was not good beacuse of heavy bad loans, the PNB's net profit slipped down by 49 per cent in Q1 FY16. On the other hand, IDBI Bank reported 27 per cent increase in net profit even though incresed in NPA by 31 per cent in Q1FY16.

From the recent news, the finance ministry plans to infuse an extra Rs 12,000 crore into state-owned banks which are charged with bad debts. This money is in addition to the Rs 7,940 crore allocated in the budget toward capitalisation and the funds will go mostly to banks that are in urgent need of capital, even if they don't meet the efficiency criteria.

Last month, the government had decided to infuse a total of Rs 20,088 crore in 13 public sector banks, including SBI, PNB, Bank of Baroda, Canara Bank, Indian Overseas Bank and Union Bank of India toshore up their capital base and to revamp of Public Sector Banks .

Recently SBI got the approval from government and RBI to increase the issued capital by raising additional equity share capital up to Rs 5,393 crore to the government. Indian Overseas Bank and Union Bank of India also informed about capital infusion from the government in place of preferential allotment of equity shares.

PSU banks are restructing the NPA staructure and government is helping to reduce the bad debts of the banks.