Indradhanush, the seven point revival plan for PSU banks might help the lenders record higher growth rates than estimated before. This plan can also effectively deal with the issues of NPAs, stated Crisil, the rating agency on Sunday.
Going by Crisil’s statement, the credit ratings of the public sector banks will stay in the high safety segment in the near future. This is possible as the roadmap on capital infusion framed by the government and the maintenance of the capital buffer well beyond the regulatory minimum strengthen the ratings.
On Friday, the government stated that it will infuse Rs 20,088 crore into the 13 PSU banks in a month. This includes SBI, the country’s largest lender cornering an amount of Rs 5,531 crore.
Crisil stated that the proposals can assist the public sector banks deal effectively with the dissatisfaction of NPAs and potentially grow quicker than the earlier estimate of 12 percent of growth on an annual basis till the fiscal year 2019.
The agency stated that Indradhanush creates a realistic estimation of the capital requirements of the public sector banks. However, it is strongly dependent on the market conditions to raise money.
It stated that the public sector banks have to gain the confidence of the market by materially enhancing their performance, but this will be a slow process taking several years to complete.
Crisil stated that the clear timeline for the setting up of the Bank Board Bureau and appointment of inducting professionals as the non-executive chairmen is important. This move will drive qualitative alterations in the strategy formation, governance, human resource practices and capital efficiency.
Furthermore, letting the senior management handle bonus and stock options will make the public sector banks quite competitive. The successful implementation of the seven point plan Indradhanush and the intensification of the corporate bond market simultaneously will improve the investment and growth potential in India.
