Has Covid-19 made PSBs more vulnerable?
While Indian banks' improved financial metrics do not fully reflect the impact of the Covid-19 pandemic, the under–capitalised PSBs are likely to remain risk averse and lose market share.
While Indian banks' improved financial metrics do not fully reflect the impact of the Covid-19 pandemic, the under–capitalised PSBs are likely to remain risk averse and lose market share.
According to the RBI, the gross NPA ratio of all scheduled commercial banks may increase from 7.5% in September 2020 to 13.5% by September 2021, and even escalate to 14.8% in severe stress scenario.
With Lakshmi Vilas Bank in its fold, the foreign bank’s branch count jumps over 18 times. But the merger could also open up a potential Pandora's box.
The 30-day moratorium on Lakshmi Vilas Bank is similar to YES Bank, protecting depositors and employees, but retail shareholders would be worst hit if amalgamation with DBS Bank India goes through.
After the change of guard at the leading private bank, its stock has witnessed 10 upper and lower circuits in the last five trading sessions.
Prashant Kumar, the bank’s administrator, echoed the words of RBI governor Shaktikanta Das that there was no cause for worry about deposits as the moratorium on withdrawals is set to end on March 18.
The beleaguered private bank’s new investors have to deal with the already declining deposit base and mounting non-performing assets.