With bad loans crossing Rs 2.5 lakh crore, public sector banks are meeting finance minister Arun Jaitley to discuss the problem as well as to talk about their stake sell plans. Jaitley mentioned that he is meeting with the banks to discuss some immediate issues. He confirmed that the non performing assets (NPA) have been a major area of concern for the banks and private sector investment would help in easing the pressure regarding the bad loans.
According to Reserve Bank of India, by December 2014, the gross non performing assets of the public sector banks have reached a whopping Rs 2,60,531 crore. The leading 30 defaulters hold 36.50% share in the NPA amount and have bad loans reaching to Rs 95,122 crore, which is more than one-third of the overall NPAs of state-owned banks.
With the public sector banks planning to raise capital from the markets, the government has lowered its stake in the banks. India’s leading public sector bank, State Bank of India (SBI) along with some other public sector lenders are expected to raise funds above Rs 16,000 crore from the market to meet their capital requirements. State Bank of India has been allowed to raise Rs 15,000 crore and Oriental Bank of Commerce is expected to raise Rs1,000 crore from the market. Canara Bank will offer its four crore equity shares to the investors to raise funds. At its current market value, the bank is expected to raise Rs 1,500 crore. Out of the 22 public sector banks in India, the government controls 22 by holding majority stakes. State Bank of India has majority stakes in the remaining banks. By reducing government stake to 52%, state-owned banks would be able to raise Rs 1.60 lakh crore.