PSU Banks Share Fall , Face Scrutiny, Capital Shortage

Banking shares under pressure ahead of RBI meet

SBI, YES Bank, Union Bank of India,BOB, PNB and IndusInd Bank are down 2-6% on the National Stock Exchange.

Banking shares are under pressure on the bourses ahead of the Reserve Bank 

of India's monetary policy review on Tuesday.

State Bank of India, Union Bank of India, Bank of Baroda, Punjab National 

Bank, IndusInd Bank, YES Bank and Canara Bank are down 2-6% on the 

National Stock Exchange (NSE). The NSE banking share index Bank 

Nifty was down 0.87% compared to 0.51% decline in benchmark CNX Nifty at 

1455 hours.

Most of the market analysts expect the central bank may hike repo rate 

further in tomorrow’s policy meet.

“The street feels hiking repo rate by 25 bps to 7.75% and simultaneously 

cutting MSF rate by the same magnitude to 8.75% is the most probable 

outcome,” the Business Standard report suggests.

“Given persistent inflationary pressure at the consumer level and uptick in 

inflation at the wholesale level, RBI is expected to increase repo rate in Oct 

29 monetary policy by 25bps. Further, the market expects a further 50 bps 

reduction in the MSF rate” says Amar Ambani, head of research at IIFL said.


Among the individual stocks, Union Bank of India has dipped 6% on NSE 

followed by Bank of Baroda (down 4%); Punjab and National Bank and 

IndusInd Bank are down 3% each, while SBI and Canara Bank are down 2% 
each.

http://www.business-standard.com/article/markets/banking-shares-under-pressure-ahead-of-rbi-meet-113102800436_1.html

Moody's: Capital infusion credit positive for state-run banks

Ratings agency Moody's Investors Service today said the recent government decision to inject Rs 14,000 crore of capital in state-run banks is credit positive. 

"The recapitalisation is credit positive because it improves the odds that public sector banks will meet regulatory capital requirements while maintaining loan growth to economically important sectors," it said in a note. 

The government said on October 23 it would inject Rs 14,000 crore in 20 state-run banks through the preferential share allotment route to meet the credit requirement of productive sectors of the economy and maintain the regulatory capital adequacy ratios in public sector banks. 

State Bank of India the largest lender, will get Rs 2,000 crore, while Central Bank of India and IDBI Bank were granted Rs 1,800 crore each. 

Changing its view, Moody's said all the 11 banks it rates will meet the minimum 8 per cent core capital requirement under Basel-II norms by end of the financial year. Earlier, it had said only six of the 11 banks would meet the requirement by March 2014. 

Commenting on Bank of India, Central Bank and IDBI Bank, Moody's said, "Without the capital injection, we estimate that they would have fallen short of that threshold, assuming loan growth and profit levels similar to those of past years." 

The rating agency also pointed out that even after the capital infusion, Indian Overseas Bank and Union Bank of India would still be unable to meet the 8 per cent tier-I capital adequacy norm.

Four PSU banks face scrutiny for fall in agriculture credit-ET

MUMBAI: Four public sector banks may come under the finance ministry's scrutiny for reporting a fall in credit to agriculture, designated as a priority sector for lending by the Reserve Bank of India. 

According to a presentation given by state-run banks to finance minister P Chidambaram on October 22, share of farm loans by Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Punjab National Bank fell between 0.24% and 25% year-on-year in the quarter to September. In case of a fall in priority sector lending, banks are mandated to invest more with Rural Infrastructure Development Fund, which could be a drag on their profitability this fiscal. Central Bank of India saw the biggest drop, with loans to agricultural sector declining 25% to Rs 4,555 crore. In the year-ago quarter , the bank had disbursed . 6,048 crore to the sector. 

While farm sector loans at Indian Overseas Bank fell 10.5% to Rs 13,859 crore, Oriental Bank of Commerce reported a 10.2% drop to Rs 4,353 crore. Punjab National Bank reported a marginal drop of 0.24% to Rs 18,704 crore. "Due to declassification of some agricultural credit last year, loan growth did not happen ," said KR Kamath, chairman and MD, Punjab National Bank. 

"Some loans have shifted to MSME sector and indirect agriculture . However, it is picking up in the current quarter. We are running aggressive campaigns in rural and semi-rural areas. We are confident of achieving the target for the full year." In August last year, RBI had revised guidelines for priority sector lending with some changes in classification of categories like agriculture, micro and small enterprises , education, housing and export credit. 

Accordingly, banks need to categorise some loans under indirect agriculture credit (loans to firms engaged in agriculture and allied activities) or MSME sector. These would not be reckoned for computation of agricultural loan targets. Normally, agricultural credit target is set as 18% of adjusted net bank credit (net bank credit plus non-SLR investments ) as per RBI guidelines. Between April and September, state-run banks disbursed Rs 1,88,050 crore, or 40% of this fiscal's agricultural loan target of Rs 4,75,000 crore. 

The growth rate of agricultural loans in the year ago period was 1% higher. M Narendra, chairman and managing director at Indian Overseas Bank said, some agricultural loans did not qualify due to revision of guidelines. "We are likely to expand our agri book to Rs 15,000 crore by March. In Tamil Nadu, the rainy season has just started. This will give us opportunity to lend. Earlier , it was a drought-like situation ," he said. The bank is holding a 100-day agricultural loan 'mela' in some southern states, from where it hopes to generate Rs 1,000-1 ,500 crore credit. 

However, financial services secretary Rajiv Takru rejected the argument extended by some of the banks for reporting a fall in farm credit. "I have no sympathy for those who use excuses to get out of the market," Takru told ET on the sidelines of a FICCI-IIFCL conference in Mumbai. "Due to (RBI) reclassification, banks' performance had started reflecting badly.