New Delhi: With the arrival of the Narendra Modi led NDA government, a coalition that is widely seen as supporter of free market, the benchmark BSE index has gained by one-third since the day year 2014 began. Keeping up with the Joneses was the CNX PSU Bank index, which soared by half.
But, investors, both retail and institutional, want Finance Minister Arun Jaitley to come up with more effective measures, so that our economy especially otherwise laggard PSU Bankex’s health improves.
What reason can be ascribed to the sharp rise?
A sizable number of bank stocks are presently trading much below their price to book value ratio in the ongoing fiscal. However, there are some which received much required fillip from the incoming capital from developed nations and hence, re-bounded to new highs, simultaneously pulling up Bankex.
Nevertheless, Modi led government still needs to do much more than what the UPA I and UPA II together accomplished. Expectations are huge, so are the challenges.
What ails our laggard banking sector?
With sub-five level growth we can’t expect much in the future, also the health of credit disbursal is poor in the country. Non Performing Assets (NPAs), bad loans, stressed assets and restructured loans have been regularly decorating financial news’ headlines since a long time now.
Better measures are required to revive the health of our weakened banks, especially PSU banks, which fear an imminent sovereign downgrade by rating agencies.
In case, it happens, raising capital in global markets will become harder.
Urgent cure required
As PJ Nayak Committee proposed government must work towards cutting its stake in public sector unit (PSU). This will help in raising the much needed capital through divestment route and aid in solving recapitalization problem even. P Chidambaram promised to allocate Rs 11,200 crore in PSUs in his interim budget last year; however, more credit needs to hit the shelf soon, and that too very soon!