Finance Ministry pushes PSU banks to sell stakes in non-core assets

NEW DELHI: The finance ministry is mounting pressure on public sector banks (PSBs) to divest their holdings in non-core assets as it wants the lenders to raise resources internally to meet their capital requirements.
The country’s largest bank, State Bank of India, has taken the lead and is evaluating to sell its 21.67% stake in Central Warehousing Corporation. “There is no fire sale and we are looking at various options,” said a senior SBI official, adding that the bank is in discussions with the government over some asset sale. A finance ministry official said any decision on stake sale has to be taken by the individual bank board.

“It is in the commercial interest of the banks to dispose of these assets as it improves their capital adequacy,” he said, adding that the government is hopeful that some PSBs will put non-core assets on the block in next fiscal. The issue was also discussed in the latest edition of annual banking conclave, Gyan Sangam, the official said.

According to finance ministry estimates, PSBs will require Rs 1.8-lakh-crore additional capital in the next four financial years. Of this, the banks will have to raise Rs 1.1 lakh crore from the market and through the sale of non-core assets, it added.

Earlier this year, SBI chairman Arundhati Bhattacharya had said the bank will look to list its subsidiaries in a bid to raise resources. SBI has already said that it is keen to divest its stake in life and general insurance ventures. It is looking to shed 10% stake in SBI Life Insurance and is open to cut its stake to 51% from 74% in SBI General.

A senior Punjab National Bank (PNB) official said the bank too is looking to monetise its real estate investments. “We are looking at various structures. There are some assets where exit option is easily available and valuations can be arrived at in a transparent manner,” the official said. PNB holds 15.3% stake in Asset Care & Reconstruction Enterprise (ACRE) and 10% stake in Asset Reconstruction Company (India) Ltd (Arcil).

Bank of Baroda and IDBI Bank are also evaluating their stakes to exit non-core businesses. Bank of Baroda, which posted a loss of Rs 3,342 crore for the October-December quarter, has said that it will not seek capital support from the government but look to raise resources internally, including sale of its non-core assets. The government is open to bring down its stake in IDBI Bank below 50%.

The government has earmarked Rs 25,000 crore towards bank captilisation in 2016-17, as a part of its Rs 70,000-crore capital infusion plans till 2019.