Stock Fundamentals

Realty check

Radhika Merwin | Updated on July 07, 2019 Published on July 07, 2019

PSBs: Not much to bank on

The market seemed unimpressed by the ₹70,000 crore of capital infusion into PSBs, proposed by the Budget for FY20. PSB stocks zoomed initially, reacting to the announcement, but lost steam by the end of the day, with many of them closing in the red. The recapitalisation plan for the current fiscal follows the huge ₹1.9-lakh crore infused into PSBs by the Centre in the last two fiscals. Much of the capital went into absorbing losses of PSBs, owing to the massive clean-up of bad loans. PSBs, including the large ones, also shied away from risky lending to conserve capital. While much of the NPA accretion has happened, the large stock of bad loans on books could continue to keep provisioning requirement high in the ensuing quarters. Also, bankers may continue to lend cautiously and, hence, the capital infusion alone may not fuel growth for PSBs. It is also unclear how the capital will be apportioned into all the banks. These uncertainties are likely to keep PSB stocks under pressure.

 

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