Employees of public sector banks (PSBs) on Thursday went on two-day strike against the move to privatise public sector banks impacting normal banking operation across the country. Many branches across different parts of the country were shut as the United Forum of Bank Union (UFBU), an umbrella body of nine bank unions including All India Bank Officers' Confederation (AIBOC), All India Bank Employees Association (AIBEA) and National Organisation of Bank Workers (NOBW) had given two day strike call. As a result, services such as deposits and withdrawal at branches, cheque clearance and loan approvals might be affected due to the strike. But ATMs are expected to function as usual.
Finance Minister Chidambaram has summoned chiefs of public sector banks on May 1. This meeting will be held 2 days after the annual credit policy to review their financial performance in 2007-08. The move is being seen in banking circles as a message from the Centre to ensure that the public sector does not take interest rate cues from the central bank alone. Detailed agenda of the meeting has not been circulated. Bankers are waiting for signals from the RBI's monetary policy
Jaitley said there was a need for the banking sector to fund infrastructure and manufacturing sectors to support the ambitions of higher growth.
While near-term performance is difficult to predict after a huge run-up, fund managers believe the PSU theme's prospects remain sound over the medium to long term.
Amid stiff competition from private and foreign players, the country's 27 public sector banks logged 35 per cent growth in profit at Rs 16,546 crore (Rs 165.46 billion) while their bad assets fell below 3 per cent during 2003-04.
Public sector banks may be allowed to recruit talented middle-level management executives of other banks at an attractive pay package so as to improve their productivity.
The Centre on Monday said nationalised banks, which were provided equity as part of capital restructuring need not return it.
Anup Roy and Krishna Kant on the challenges the public sector banks face in revitalising themselves
Public sector banks want to pass on the increasing cost of funds to borrowers across the board, but are unwilling to take the plunge right away.
The performance of banking and information technology (IT) stocks has had a significant impact on the composition of diversified mutual fund (MF) portfolios. Over the past two months, these sectors have become increasingly dominant, now constituting nearly 30 per cent of the total allocation in many diversified MF portfolios.
The government has said that public sector banks have asked for much more capital than it can give.
The government will soon finalise a reshuffle of top management teams in the country's leading 11 public sector banks (PSBs), 10 of which are listed on the stock exchanges. They include the country's third largest bank, Canara Bank, and fifth largest bank, Bank of Baroda.
A host of public sector banks had cut interest rates in the earlier part of this year following an advisory from Finance Minister P Chidambaram in January. Private and smaller state-owned banks, however, did not cut rates.
The move to make the appointment process more robust comes after last month's arrest of S K Jain, chairman and managing director of Syndicate Bank last month, over graft charges.
RBI's interest rate decision, macroeconomic data announcements and global trends are the key factors that would dictate the momentum in the equity market this week, analysts said.
In a move that is likely to attract political controversy, the committee on financial sector assessment has recommended that the banking sector should be gradually opened to foreign players and that the government lower its shareholding in public sector banks below 51 per cent and allow state-owned players to merge if the Centre's stake cannot go below the prescribed lower limit.
In May, MFs were the net sellers in several PSUs, as they deployed Rs 47,600 crore in equities during the month.
'Investing in these funds makes sense if their net yield over better-quality funds -- corporate bond funds or banking and PSU funds -- is meaningful.'
The move comes even as Bank of India on Wednesday said its corporate clients will suffer mark-to-market losses of around Rs 125 crore. It has 34 clients with 74 derivative transactions. Last week, State Bank of India said its clients may incur MTM losses of up to Rs 700 crore at the end of March 2008.
SBI remains a favourite of most brokerages in the PSB segment.
Finance Minister Pranab Mukherjee will meet chiefs of public sector banks here on Saturday, at a time when industrial growth has decelerated to a 13-month low of 7.1 per cent and interest rates have moved northward.
Public sector banks have asked the Centre to intervene as talks with bank unions for allowing half of their employees a second chance to opt for pension instead of provident fund have reached a deadlock.
Banks, including country's largest lender State Bank of India, have informed the customers well in advance about the likely inconvenience due to strike.
Reckless lending during the three years of the retail credit boom beginning 2003-04 is hurting public sector banks hard.
Delhi International Airport Ltd, the five-company consortium led by Bangalore-based infrastructure conglomerate GMR Group that is upgrading Delhi airport, has managed to raise over Rs 1,000 crore (10 billion) to meet its financial obligations for the Rs 8,890-crore (80 billion) project.
Public sector banks, in a frenzy to cash in on the retail credit boom during the three years beginning 2003-04
Public sector banks have suddenly developed cold feet on raising lending rates even if it means sacrificing on their bottom lines.
The nation-wide strike call has been given by United Forum of Bank Unions, consisting of nine national level unions, including AIBEA, NCBE, BEFI, INBEF, NOBW and AIBOC.
The UFBU is an umbrella body of nine bank employees unions of the country and claims to have members from public, private and foreign banks. "We are on strike from today as Indian Banks' Association did not concede to the bank unions demand for the wage hike," said United Forum of Bank Unions convener C H Venkatachalam.
Jaitley said the government had earmarked Rs 25,000 crore (Rs 250 billion) for recapitalisation.
On government's last week's announcement of revamping of PSU banks, Fitch Ratings said the move is "credit positive, but risks remain".
Global brokerage CLSA has lowered its target price for IndusInd Bank from Rs 1,200 to Rs 900 while maintaining an outperform rating on the stock after the private lender disclosed a net worth hit of Rs 1,500 crore due to an accounting gap. The revised price target still implies an upside of 34 per cent from current levels.
A section of analysts feel now may not be a bad time to buy select PSBs.
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