Challenges of Disinvestment in Public Sector Banks in India

2016 ◽  
pp. 150-159
Author(s):  
Sushil J. Lalwani ◽  
Shweta Lalwani
Keyword(s):  
Public Sector ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Public Sector Banks ◽  
Opposition Party ◽  
Congress Party ◽  
Privatization Process ◽  
The Government ◽  
Near Future

Both Disinvestment and Privatization process in Public Sector Banks initiated by the then NDA Government came to an end soon after UPA Government took over. The Atal Bihari Vajpayee government had proposed to reduce government holding in state-run banks to 33% but the amendment could not be passed in Parliament as Congress, which was the main Opposition party, blocked the move. Later on Congress party with other partners came to power and even The Ministry of Disinvestment was closed .The recommendations of Disinvestment Commission could not be implemented. For last one decade disinvestment process came to a grinding halt, however, now again there are possibilities that Public Sector Banks may initiate the process again. Privatization process may seem to be a remote possibility at present, however, Disinvestment is on agenda of present government. The Government is now set to reduce shareholding to less than 52% while maintaining ownership but selling additional shares which will infuse more capital to fulfil capital adequacy norms as per Basel III. There are a number of challenges to this process and it is necessary to expedite the process. It is assumed that disinvestment process will make public sector banks more accountable and also efficiency may improve, ultimately pave way for privatization in near future.

Analysis of Financial Performance of Public Sector Banks in India: CAMEL

2020 ◽  
pp. 097674792096686
Author(s):  
Yudhvir Singh ◽  
Ram Milan
Keyword(s):  
Public Sector ◽  
Banking Sector ◽  
Positive Impact ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Factors Affecting ◽  
Public Sector Banks ◽  
The Government ◽  
And Performance ◽  
Asset Quality

Public sector banks have been merged by the government in the last few years. This is the rationale behind conducting this study. The purpose of this article is to determine the factors affecting the performance of public sector banks in India and the interrelationship between bank-specific determinants and performance of public sector banks. In this article, we shall analyse the financial data of all the public sector commercial banks for a period spread across 11 years (2009–2019); Capital adequacy, Assets quality, Management efficiency, Earning, and Liquidity (CAMEL) has been used as a performance determinant; system generalised method of moments (GMM) analysis has been used to find the effect of determinants on the performance measurement of public sector banks; and CCA (canonical correlation analysis) has been used to find the interrelationship between the bank-specific determinants and the performance of public sector banks. The finding has important implications in terms of performance in the banking sector. Certain limitations of this study are: It is based on secondary data. The study only covers the financial aspects and not the non-financial aspects. It is found that the asset quality is negatively related with performance of public sector banks. Liquidity and inflation are inversely related to performance of public sector banks in India. Capital adequacy is positively related with banks’ performance, but inversely related with banks’ interest margin. GDP growth has a significant positive impact on banks’ performance, but inversely related with banks’ interest income. Inflation rate is inversely related with banks’ performance. Banking sector reforms are insignificantly related with banks’ performance.

Indian corporations are unlikely to set up banks

2020 ◽  
Keyword(s):  
Public Sector ◽  
Central Bank ◽  
Banking System ◽  
Capital Adequacy ◽  
Content Type ◽  
Public Sector Banks ◽  
The Government ◽  
Set Up ◽  
Bad Debt

Significance The government and central bank are looking for ways to strengthen the country’s banking system, which is beset by low capital adequacy ratios (CARs) and rising non-performing assets (NPAs). India’s leading conglomerates are asset rich, and their profitability is growing. Impacts The RBI will come under pressure to increase regulation of private as well as public sector banks. Many state-owned banks will merge in a bid to reduce their bad debt. Small NBFCs will face a challenge to sustain liquidity.

Preparedness level of Indian public sector banks for implementation of Basel III

2019 ◽  
Vol 45 (2) ◽  
pp. 172-189 ◽  
Author(s):  
Krishan Boora ◽  
Kavita Jangra
Keyword(s):  
Public Sector ◽  
Management Practices ◽  
Implementation Process ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Advanced Technology ◽  
Basel Iii ◽  
Content Type ◽  
Public Sector Banks ◽  
The Impact

PurposeThe purpose of this paper is to explore the preparation level of Indian public sector banks for the implementation of Basel III. It is mandatory for public sector banks in India to make adequate preparations to comply with the Basel III international regulations.Design/methodology/approachThis study uses a modified questionnaire (Ernst & Young, 2013; AL-Tamimiet al., 2016) to examine the preparedness level of Indian public sector banks for implementing Basel III. Seven hypotheses are developed and tested.FindingsThe results show that Indian public sector banks are positively inclined toward Basel III, and the awareness level of Indian banks’ managers is adequate concerning Basel III. The banks have required resources for the proper implementation of Basel III, which is a prerequisite for its implementation. Banks know about the expected benefits that can be attained from implementing Basel III appropriately and banks are also aware of the high cost attached with Basel III. The capital adequacy ratio of public sector banks is above 11 percent, showing the banks’ readiness for Basel III.Practical implicationsThe public sector banks need to concentrate on revising the existing policies to sharpen their risk management practices. Moreover, improving the level of education on Basel III is still required and the results also support the importance of advanced technology and trained human resources at all level as a basic requirement for the implementation of Basel III. It can be achieved by the support of government, Reserve Bank of India (RBI) and other concerned agencies. The enforcement of Basel III will also create various challenges for Indian public sector banks, in terms of declining profitability, increasing capital requirements and nonperforming assets. That is why the impact of Basel III norms on Indian public sector banks cannot be undervalued.Originality/valueThe findings would assist the Indian public sector banks to know about their preparedness level for Basel III and what are the necessary actions to encourage Basel III implementation process. The present study would be important for regulators and decision makers in banks, as the main purpose of this study is to increase their awareness of Basel III norms. The result would also help the regulators regarding the corrective measures that should be taken by RBI in order to motivate the banks for enforcing Basel III.

India’s 5G auction will boost Reliance’s digital plans

2021 ◽  
Keyword(s):  
Public Sector ◽  
Business Strategy ◽  
Financial Support ◽  
Content Type ◽  
Public Sector Banks ◽  
Spectrum Auction ◽  
Floor Price ◽  
The Government

Significance This came after the government announced plans for a 4G spectrum auction in March 2021, after a five-year gap. There is growing speculation that this will be followed by an auction of 5G spectrum later in the year. Impacts Reliance’s lead on 5G will boost its broader digital business strategy. New financial support to indebted telcos will help to avoid further strain on public sector banks. Data tariffs are likely to remain competitive in India, even after a new floor price.

scholarly journals Bad Loans of Public Sector Banks in India: A Panel Data Study

2019 ◽  
Vol 5 (1) ◽  
pp. 22-30
Author(s):  
Kandela Ramesh
Keyword(s):  
Public Sector ◽  
Panel Data ◽  
Financial Stability ◽  
Random Effect ◽  
Random Effect Model ◽  
Negative Relationship ◽  
Banking System ◽  
Capital Adequacy ◽  
Public Sector Banks ◽  
Bad Loans

The soundness of the banking system is necessary for economic advancement and financial stability. In the contemporary era, the Indian banking system has suffered from the accumulation of substantial non-performing assets (NPAs), especially in the public sector banks (PSBs). This article examines the financial determinants of bad loans in the Indian PSBs with the help of panel data regression analysis. Panel dataset of 21 Indian PSBs for eight years from 2010 to 2017 is used for the study. For analysis, net non-performing assets (NNPAs) as a dependent variable and financial indicators as independent variable are used. Using the random effect model, it is found that credit–deposit ratio, loan maturity, and return on assets have a negative relationship with NNPAs. These factors have an association with a lower level of NPAs. Operating expenses and capital adequacy ratio have an insignificant effect on NNPAs. On the other hand, factors such as priority sector loans, collateral values, and non-interest income have a positive impact on NNPAs. These factors are an indication of a higher level of bad loans and are adding to the accumulation of NPAs in PSBs.

Prospects for India in 2018

2017 ◽  
Keyword(s):  
Public Sector ◽  
Prime Minister ◽  
Content Type ◽  
Public Sector Banks ◽  
Bharatiya Janata Party ◽  
Economic Slowdown ◽  
The Government

Subject Prospects for India in 2018. Significance India’s ruling Bharatiya Janata Party (BJP) has responded to the recent economic slowdown by drawing up plans to recapitalise public sector banks (PSBs) and invest in infrastructure. Prime Minister Narendra Modi is also under pressure to create jobs. The government will be expected to deliver on its promises with elections due in around 18 months’ time.

Credit Risk and Capital Adequacy of Banks

2000 ◽  
Vol 4 (2) ◽  
pp. 42-49
Author(s):  
K. Satyanarayana
Keyword(s):  
Credit Risk ◽  
Economic Value ◽  
Value Added ◽  
Sustainable Growth ◽  
Capital Adequacy ◽  
Gear Up ◽  
Public Sector Banks ◽  
Capital Adequacy Ratio ◽  
Return On Capital ◽  
The Government

Prudential regulation of banks and financial institutions, especially the stipulation of risk weighted capital adequacy ratio, has brought into sharp focus their inherent weaknesses. The real licence to expand banking is no more a nod from the regulator than the adequacy of capital backup. The situation is getting complex with deregulation and globalisation wherein the inherent risks especially the credit risk and market risk, need to be covered by proper capital adequacy ratio. Asset managers have to be always alert about the inherent risk and return embedded in any proposed asset accretion. Even before stabilising with an adequate CAR, banks are required to gear up with the proposed and more rigorous new capital adequacy framework of Basle Committee. Instead of confining to centralised approach, the banks can plan and monitor continuously asset expansion at zonal/regional and branch levels with a notional concept of capital adequacy. While pricing the assets, especially in a decentralised process of decision making in the form of both fund based and non-fund based exposures, cost of capital for any additional exposure needs to be taken care in the relevant computations. Ultimately the scope for healthy and sustainable growth of any bank depends upon its competitiveness to attract capital which in turn depends upon the economic value added, i.e., return on capital net of opportunity cost of such capital. Now that the government has almost stopped further infusion of capital into (public sector) banks, are the banks capital market fit?

Action at a distance

2018 ◽  
Vol 26 (1) ◽  
pp. 39-61
Author(s):  
Athula Ekanayake
Keyword(s):  
Corporate Governance ◽  
Public Sector ◽  
Long Distance ◽  
Content Type ◽  
Public Sector Banks ◽  
Good Corporate Governance ◽  
Distance Control ◽  
Action At A Distance ◽  
The Government ◽  
Case Organization

Purpose By using Latour’s notion of “action at a distance” (Latour, 1987), the purpose of this paper is to examine the ways in which the government acts at a distance to achieve corporate governance of public sector banks, and the extent to which accounting enables such actions of the government. Design/methodology/approach This study follows the qualitative research approach and adopts the case study research method. A major public sector bank in Sri Lanka was selected as the case organization for this study. Data were gathered from semi-structured interviews with organizational participants and document study. Findings The study provides evidence to suggest that inscriptions produced through four areas of accounting, namely external reporting, external auditing, management accounting and internal auditing, have the capacity to develop strong explanations enabling action at a distance and good corporate governance in the case organization. The study also provides evidence to show how the role of accounting in long-distance control and corporate governance in the case organization is influenced by various contextual factors. In particular, the study finds that undue government interference over the case organization to gain the long-distance control have resulted in deteriorating the level of corporate governance. Research limitations/implications The findings support the literature that examines the accounting in its social context. Practical implications The findings suggest that actors should be allowed to operate independently, particularly without political expedience and undue influences from pressure groups, which ensure effective utilization of accounting inscriptions by the actors in long-distance control as well as good corporate governance of public sector banks. Originality/value Although research into accounting in public sector organizations has gained considerable importance in recent times, those studies examining public sector banks are still lacking. The paper aims to fill this gap.

scholarly journals A Study on Management of Non Performing Assets in Priority Sector reference to Indian Bank and Public Sector Banks (PSBs)

2016 ◽  
Vol 2 (1) ◽  
pp. 31
Author(s):  
Selvarajan BSR
Keyword(s):  
Public Sector ◽  
Tamil Nadu ◽  
Banking Industry ◽  
Action Plan ◽  
The Other ◽  
Public Sector Banks ◽  
The Government ◽  
Indian Banks ◽  
Bad Debt ◽  
New Strategies

<p>The problem of NPA is not limited to only Indian public sector banks, but it prevails in the entire banking industry.  Major portion of bad debts in Indian Banks arose out of lending to the priority sector at the dictates of politicians and bureaucrats.  If only banks had monitored their loans effectively, the bad debt problem could have been contained if not eliminated. The present study has been designed to illustrate the necessity and the nature of the non-performing assets in Indian Bank, Tamil Nadu. Finding out Non Performing Assets –NPA- under the Priority sector lending in Indian Bank and Compare with Public Sector Banks and making appropriate suggestions to avoid future NPAs and to manage existing NPAs in Indian Bank are the other major objectives of this study. The scope of this study covers on the basis: (i)  measuring for the banks to avoid future NPAs &amp; to reduce existing NPAs, (ii) guiding for the government in creating &amp; implementing new strategies to control NPAs, (iii) selecting appropriate techniques suited to manage the NPAs and develop a time bound action plan to arrest the growth of NPAs.</p>

Investing Productively: The Banking Sector

New India ◽  
2020 ◽  
pp. 145-178
Author(s):  
Arvind Panagariya
Keyword(s):  
Public Sector ◽  
Detailed Analysis ◽  
Banking Sector ◽  
Public Sector Banks ◽  
Formal Economy ◽  
Reserve Bank ◽  
Private Banks ◽  
The Government ◽  
Public Money ◽  
Indian Banks

Banks collect savings by households via deposits and channel them to the most productive investors in the form of credit. What happens to bank credit has a determining impact on growth, especially in the formal economy. A key feature of Indian banks has been repeated episodes of accumulation of non-performing assets followed by their recapitalization by the government using public money. These episodes have been concentrated in public sector banks (PSBs), which continue to account for two-thirds of banking assets. This chapter offers a detailed analysis of these episodes and argues that it is time for the government to give serious thought to privatization of PSBs. PSBs are subject to regulation by both the government and the Reserve Bank of India (RBI), but RBI has limited powers over them. On average, private banks outdo PSBs along nearly all dimensions in terms of efficiency.

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