New Delhi: With the privatization of public sector banks and strategic disinvestment of banks, the banking sector will witness significant reforms in the coming year. IDBI Bank Government’s agenda for 2022.
All that said, the emerging coronavirus situation, especially in the wake of the Omicron variant, could hinder the pace of reforms.
According to the data, despite the impact of the second wave of the pandemic, the banking sector has performed quite well in 2021.
As per the government’s 4Rs strategy of Recognition, Resolution, Recapitalization and Reform, the Non-Performing Assets (NPA) of the banking sector has come down to Rs 8,35,051 crore as on March 31, 2021.
According to the Financial Stability Report (FSR) released by the Reserve Bank of India (RBI) in July 2021, macro-stress tests, based on regression modeling, indicate that the ratio of gross non-performing assets (GNPA) scheduled commercial bankUnder the baseline scenario, this could increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022.
The net profit of public sector banks (PSBs) rose to Rs 14,012 crore in the first quarter and rose to Rs 17,132 crore in the second quarter ended September 2021. The combined profit for the first half of the current financial year (Rs 31,114 crore) is close to the total profit earned (Rs 31,820 crore) in the entire previous financial year (2020-21).
Similarly, private sector banks including HDFC Bank, ICICI Bank and Kotak Mahindra Bank also posted good profits with reduction in bad loans.
Improved financial health along with the new Public Sector Enterprises (PSE) policy has laid a strong foundation for the privatization of public sector banks, a long pending financial sector reform.
Several government functionaries have compared the new PSE policy with the historic reforms undertaken since 1991.
Finance Minister Nirmala Sitharaman, while unveiling the PSU policy in the Budget for 2021-22, had said that PSUs would be disinvested in other sectors, except in four strategic sectors.
The four sectors are nuclear energy, space and defence; transport and telecommunications; electricity, petroleum, coal and other minerals; and banking, insurance and financial services in non-strategic sectors.
In line with the PSE policy, the finance minister had also announced privatization of two PSBs as part of the disinvestment drive to raise Rs 1.75 lakh crore in the budget.
The Banking Laws (Amendment) Bill, which is likely to be introduced in the upcoming budget session, is expected to help bring down the minimum government stake in PSBs from 51 per cent to 26 per cent.
Government think-tank NITI Aayog has already suggested two banks and one insurance company to the Core Group of Secretaries on disinvestment for privatization. According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for privatization.
Recently, in a reply to Parliament, Sitharaman had said that the cabinet has not taken any decision on privatization of two public sector banks.
As far as the strategic sale of IDBI Bank is concerned, the government is gearing up to invite expressions of interest from entities looking to acquire the LIC-controlled lender soon.
In May, the cabinet had given in-principle approval for the transfer of management control as well as strategic disinvestment of IDBI Bank.
The central government and LIC hold more than 94 per cent equity in IDBI Bank. At present, LIC has management control with 49.24 per cent stake while the government holds 45.48 per cent. The non-promoter shareholding is around 5.29 per cent.
When it comes to the financial health of the banking sector, lenders with a majority in the public sector have posted record profits.
As a result, PSBs raised capital funds of Rs 58,697 crore in the last financial year, the highest amount raised in a single financial year.
At the behest of the RBI, private sector lenders also raised funds to protect themselves from future uncertainties.
The capital adequacy ratio (CAR) of public sector banks rose to 14.3 per cent at the end of June 2021, while the provision coverage ratio of public sector banks rose to an 8-year high of 84 per cent.
Despite the pandemic’s cascading impact on the economy, the recovery during the financial year remained strong at over 10 per cent.
At the same time, the profitability of public sector banks has improved on a consolidated basis post amalgamation.
profitability of State Bank of India In which five associate banks of SBI and Bhartiya Mahila Bank were merged with effect from April 1, 2017, there was a profit of Rs 20,410.47 crore in 2020-21, rising from a loss of Rs 1,378.35 crore in the financial year 2016-17.
Similarly, Bank of Baroda, in which Vijaya Bank and Dena Bank, amalgamated with effect from April 1, 2019, improved from a loss of Rs 8,339.27 crore in 2018-19 and a profit of Rs 828.96 crore in 2020-21.
In the case of Punjab National Bank, including Oriental Bank of Commerce and United Bank Of India Amalgamated from April 2020, the performance improved from a loss of Rs 8,310.93 crore in 2019-20 to a profit of Rs 2,021.62 crore in 2020-21.
The banking sector, in alliance with the government, played an important role during the year to support the industry and business affected by COVID.
For example, under the Emergency Credit Line Guarantee Scheme (ECLGS), which was backed by a 100 per cent guarantee from the central government, banks and non-banking financial companies (NBFCs) sanctioned loans worth Rs 2.97 lakh crore till November 26, 2021. Huh. ,
As far as the resolutions are concerned, PSBs have restructured 9.8 lakh MSME accounts as of November 26 amounting to Rs 58,524 crore, and 8.5 lakh loan accounts of individual borrowers amounting to Rs 60,662 crore.
Under PM Street Vendor’s Atma Nirbhar Nidhi (PM Swanidhi) scheme, 30.23 lakh street vendors got credit access of Rs 3,054 crore till November 30.
In addition, the government has launched a nationwide credit outreach program on October 16, 2021, under which banks are organizing special camps across the country to provide loans to eligible borrowers.
All that said, the emerging coronavirus situation, especially in the wake of the Omicron variant, could hinder the pace of reforms.
According to the data, despite the impact of the second wave of the pandemic, the banking sector has performed quite well in 2021.
As per the government’s 4Rs strategy of Recognition, Resolution, Recapitalization and Reform, the Non-Performing Assets (NPA) of the banking sector has come down to Rs 8,35,051 crore as on March 31, 2021.
According to the Financial Stability Report (FSR) released by the Reserve Bank of India (RBI) in July 2021, macro-stress tests, based on regression modeling, indicate that the ratio of gross non-performing assets (GNPA) scheduled commercial bankUnder the baseline scenario, this could increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022.
The net profit of public sector banks (PSBs) rose to Rs 14,012 crore in the first quarter and rose to Rs 17,132 crore in the second quarter ended September 2021. The combined profit for the first half of the current financial year (Rs 31,114 crore) is close to the total profit earned (Rs 31,820 crore) in the entire previous financial year (2020-21).
Similarly, private sector banks including HDFC Bank, ICICI Bank and Kotak Mahindra Bank also posted good profits with reduction in bad loans.
Improved financial health along with the new Public Sector Enterprises (PSE) policy has laid a strong foundation for the privatization of public sector banks, a long pending financial sector reform.
Several government functionaries have compared the new PSE policy with the historic reforms undertaken since 1991.
Finance Minister Nirmala Sitharaman, while unveiling the PSU policy in the Budget for 2021-22, had said that PSUs would be disinvested in other sectors, except in four strategic sectors.
The four sectors are nuclear energy, space and defence; transport and telecommunications; electricity, petroleum, coal and other minerals; and banking, insurance and financial services in non-strategic sectors.
In line with the PSE policy, the finance minister had also announced privatization of two PSBs as part of the disinvestment drive to raise Rs 1.75 lakh crore in the budget.
The Banking Laws (Amendment) Bill, which is likely to be introduced in the upcoming budget session, is expected to help bring down the minimum government stake in PSBs from 51 per cent to 26 per cent.
Government think-tank NITI Aayog has already suggested two banks and one insurance company to the Core Group of Secretaries on disinvestment for privatization. According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for privatization.
Recently, in a reply to Parliament, Sitharaman had said that the cabinet has not taken any decision on privatization of two public sector banks.
As far as the strategic sale of IDBI Bank is concerned, the government is gearing up to invite expressions of interest from entities looking to acquire the LIC-controlled lender soon.
In May, the cabinet had given in-principle approval for the transfer of management control as well as strategic disinvestment of IDBI Bank.
The central government and LIC hold more than 94 per cent equity in IDBI Bank. At present, LIC has management control with 49.24 per cent stake while the government holds 45.48 per cent. The non-promoter shareholding is around 5.29 per cent.
When it comes to the financial health of the banking sector, lenders with a majority in the public sector have posted record profits.
As a result, PSBs raised capital funds of Rs 58,697 crore in the last financial year, the highest amount raised in a single financial year.
At the behest of the RBI, private sector lenders also raised funds to protect themselves from future uncertainties.
The capital adequacy ratio (CAR) of public sector banks rose to 14.3 per cent at the end of June 2021, while the provision coverage ratio of public sector banks rose to an 8-year high of 84 per cent.
Despite the pandemic’s cascading impact on the economy, the recovery during the financial year remained strong at over 10 per cent.
At the same time, the profitability of public sector banks has improved on a consolidated basis post amalgamation.
profitability of State Bank of India In which five associate banks of SBI and Bhartiya Mahila Bank were merged with effect from April 1, 2017, there was a profit of Rs 20,410.47 crore in 2020-21, rising from a loss of Rs 1,378.35 crore in the financial year 2016-17.
Similarly, Bank of Baroda, in which Vijaya Bank and Dena Bank, amalgamated with effect from April 1, 2019, improved from a loss of Rs 8,339.27 crore in 2018-19 and a profit of Rs 828.96 crore in 2020-21.
In the case of Punjab National Bank, including Oriental Bank of Commerce and United Bank Of India Amalgamated from April 2020, the performance improved from a loss of Rs 8,310.93 crore in 2019-20 to a profit of Rs 2,021.62 crore in 2020-21.
The banking sector, in alliance with the government, played an important role during the year to support the industry and business affected by COVID.
For example, under the Emergency Credit Line Guarantee Scheme (ECLGS), which was backed by a 100 per cent guarantee from the central government, banks and non-banking financial companies (NBFCs) sanctioned loans worth Rs 2.97 lakh crore till November 26, 2021. Huh. ,
As far as the resolutions are concerned, PSBs have restructured 9.8 lakh MSME accounts as of November 26 amounting to Rs 58,524 crore, and 8.5 lakh loan accounts of individual borrowers amounting to Rs 60,662 crore.
Under PM Street Vendor’s Atma Nirbhar Nidhi (PM Swanidhi) scheme, 30.23 lakh street vendors got credit access of Rs 3,054 crore till November 30.
In addition, the government has launched a nationwide credit outreach program on October 16, 2021, under which banks are organizing special camps across the country to provide loans to eligible borrowers.
,