Tag: privatising

Ind-Ra, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The Government’s plan to privatise two public lenders could lead to a material negative migration of long-term issuer ratings, as well as ratings on Tier-II instruments of the banks, specifically amongst the weaker non-consolidated ones, said India Ratings (Ind-Ra). The ratings agency said the government’s outline of privatising, rather than divesting, could translate to ceding both the majority shareholding as well as control over the banks – which have not been formally identified yet.

“The agency believes ceding of control should make the proposal attractive for potential investors and may make it more viable to attract a large quantum of capital that this exercise may require,” said Ind-Ra in its assessment.

The ratings agency said it had a long-term issuer rating floor of IND AA, for government majority owned banks, which factored along timely government intervention and thus, minimal default probability. Hybrid instruments, such as AT-1 instruments, were rated on their standalone profiles – which factored in ordinary support from the government, largely due to the terms of Hybrid instruments which could prevent government support. “Ind-Ra’s rating of AT1 instruments for weaker government banks could be multiple notches below the long-term issuer rating, factoring the inherent weakness of the institutions along with discretionary nature of the security which could impact its ability to service the instrument,” noted the agency.

Ind-Ra, citing the example of IDBI Bank, the only lender the government has thus far ceded majority control in, said it would as per its criteria place the ratings on a rating watch, and accordingly take rating calls based on the ‘final contours’ of the transaction.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Govt should strengthen PSBs instead of privatisation: AIBEA

Banking & Finance

[ad_1]

Read More/Less


The Government should strengthen public sector banks (PSBs) by helping them recover bad loans instead of privatising them, according to the All India Bank Employees’ Association (AIBEA).

“The only problem PSBs facing is bad loans. Most of the bad loans are due to the corporates and rich industrialists,” said CH Venkatachalam, General Secretary, AIBEA, in a statement. He underscored that the Government should support PSBs, take action against the defaulting corporates and industrialists, and not privatise the banks.

“Many private sector banks have collapsed in our country. Last year YES Bank was in trouble, and through eight financial intermediaries, including State Bank of India, that bank was rescued. Recently, Lakshmi Vilas Bank, another private sector bank, got into trouble, and it was given to a foreign bank. Hence, one cannot accept that private sector banks are very efficient,” said Venkatachalam.

The Association General Secretary observed that only public sector banks give loans to common people, poor people, agriculture, small-scale sectors, etc. Private banks help only the big corporates, he alleged. “Public sector banks give permanent jobs to young unemployed. In private banks, it is only contract jobs.”

“Private banks will not open branches in rural areas. Only public sector banks have opened thousands of branches in the villages,” he said. He feared that if PSBs are privatised, rural branches will be closed in the name of cost-saving.

With 75 per cent of total branches in the country, public sector banks have opened 40.50 crore Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, but private sector banks, with 25 per cent of the total branches, have opened only 1.25 crore PMJDY accounts.

Also read: Govt could raise up to ₹12,800 cr if it divests in 2 PSBs: CARE Ratings

“Total deposits in the banking sector today is 146 lakh crore. This is hard-earned public savings. We cannot allow private hands to play with this huge public savings. Hence privatisation is a bad idea. If the Government is serious about economic development, public sector banks should be strengthened,” he added.

The United Forum of Bank Unions, the umbrella body of nine trade unions in the banking sector, has called for a strike on March 15 and 16 to protest against the Government’s decision to privatise two PSBs.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,