Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

The road ahead for Public Sector Banks
Thu, 5 Mar Pre-Open

We have often highlighted the woes in the Public Sector Banking space. High NPAs, poor growth and poor capital adequacy - have been some of the key issues that these banks have been facing for years. While nothing noteworthy has been done by banks on the risk management front, measures like corporate debt restructuring have been misused to avoid the accounting scare.

As an article in the Business Standard points out, the key issues in the PSU banks are reflecting in their valuations as well. Now that even the Government is averse to extend capital support to the banks that do not qualify on efficiency parameters, they are unlikely to get any favors from investors. And this could be a serious hurdle as far as equity raising plans are concerned. In such a situation, one can expect significant consolidation in the banking sector in the times to come, where under performers will be taken over by stronger counterparts.

One must note that 10 out of 12 PSU banks that have been denied capital infusion have gross NPAs above 5% as on quarter ended December 2014. With regulatory forbearance on debt recast coming to an end, with higher provision requirements, the accounting picture may look worse for a lot of these banks.

Quite deservedly, these are trading at deep discounts to book values. While the move not to support these banks can lead to volatility in the short term, we believe it is important to ensure better asset quality.

That said, we also need to remember that it is the Government itself that is responsible for the poor performance of these banks.

It is a known fact that public sector banks do not enjoy autonomy and are often arm twisted to lend to non profitable ventures. Hence, unless structural reforms are introduced to address these issues, it is unlikely that future will be any better for public sector banks.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "The road ahead for Public Sector Banks". Click here!

  

Views on News

Top 5 Recent IPO Developments You Should Know (Views On News)

May 12, 2021

So far in 2021, IPOs in India have raised nearly US$ 3 bn, the best start to the year since 2018.

How Did Mindtree Perform in Q4FY21? (Company Info)

Apr 20, 2021

Here's the rundown on the company's latest quarterly results.

Die Hard 4.0 Redux? (Fast Profits Daily)

May 14, 2021

A Hollywood style cyber-attack has caused shockwaves across financial markets.

What Godrej Consumer's 22% Single-Day Gain Tells About My Blueprint (Profit Hunter)

May 14, 2021

The company's FY21 earnings performance turned out better than my estimates but...

Top Pick for Next Decade podcast (Views On News)

May 13, 2021

Rahul Shah on his favoured pick for the next decade.

More Views on News

Most Popular

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

My Secret to Find Breakthrough Stocks (Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

The Worst Sector in the Market (Fast Profits Daily)

May 11, 2021

The worst sector in the stock market according to the charts.

The Key to Profit from India's EV Revolution (Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


May 12, 2021 (Close)

MARKET STATS