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Govt's stake divestment to be credit negative for PSBs: ICRA
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SME Times News Bureau | 18 Sep, 2020
The proposed divestment of the
Centre's majority stake in certain PSBs will be credit negative for
these lenders, ratings agency ICRA said on Thursday.
Citing
recent reports which suggest a possible divestment of majority stake in
few PSBs that were left out of the PSBs consolidation exercise announced
last year, ICRA said that most of these PSBs have weak credit profile
and their credit ratings are primarily supported by their sovereign
ownership and a stable deposit base, which in turn is supported by their
ownership.
"The existing ratings are also notched up from the
standalone credit profile and going forward, the ratings on these PSBs
would reflect their standalone credit profile depending on their new
ownership of these banks," it said in a statement.
Furthermore,
ICRA expects the deposit franchise for these banks will be monitorable
as these deposits could be highly sensitive to their ownership.
The
ratings agency noted that the proposed divestment of these PSBs will
require amendment to the Banking Companies (Acquisition And Transfer Of
Undertakings) Act, 1970/1980, which mandates the Centre to hold no less
than 51 per cent of the paid-up capital of these lenders.
Commenting
on these developments, Karthik Srinivasan, Group Head - Financial
Sector Ratings, ICRA said: "The financial profile of these PSBs is very
weak and the standalone profiles of these banks could be low within
investment grades rating given their weak asset quality, profitability,
capital and solvency profile."
"The liability profile for these banks will become a key monitorable in the immediate term."
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