| |
Sep 3, 1999
Indian Bank recapitalisation to cost Rs 14 bn
According to newspaper reports, the government is likely to infuse upto Rs 14 bn into Indian Bank through recapitalisation bonds. The move is aimed at shoring up the bank's net worth, which has been fully eroded by the past year's losses. Indian Bank has also initiated measures to recover non-performing loans. The Bank has achieved some measure of success in recovering bad loans.
The Central Government has continued to support weak banks even though its fiscal position has been deteriorating. Although the actions may be justified as related to public welfare, there are no visible systemic changes that have taken place at the banks to ensure that they will not find themselves in similar situations again.
The Government has failed to use the method involving the set up of the Asset Reconstruction Company (ARC) to deal with the problem of non-performing assets (NPAs) at banks and financial institutions. Under this method, the ARC would buy out the NPAs of the banks and later proceed to recover them. Overall this method is quicker and ensures that the concerned entity is able to start on a clean slate with immediate effect. Moreover, the entire burden of the entity's revival does not pass onto the Government. There is also a possibility that the ARC is able to recover a large part of the loans, and turn in a profit, which would then be distributed amongst the promoters-largely the government.
The Indian banking sector is highly fragmented with the existence of a large number of marginal players. These banks have continued to exist due to the support of mainly the Government. However, with competition getting hotter, it is unlikely that the banking sector will survive for long in its current form. What is required is large-scale consolidation and employee and branch rationalisation to increase efficiency of the banking sector.
More Views on News
Aug 22, 2017
State Bank of India (SBI) continues to battle sliding asset quality and sluggish credit growth.
Aug 10, 2017
IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.
Aug 10, 2017
Asset quality will be the key thing to watch out for going forward.
Jul 31, 2017
Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.
Jul 25, 2017
Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.
More Views on News
Most Popular
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
More
Copyright © Equitymaster Agora Research Private Limited. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407 | |
|
TRACK GLOBAL TR. BANK
- Track your investment in GLOBAL TR. BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
- Add To MyStocks
|
|
Equitymaster requests your view! Post a comment on "Indian Bank recapitalisation to cost Rs 14 bn". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!