Prajna Capital - An Investment Guide

THE GOVERNMENT has announced the recapitalisation of public sector banks in the interim budget to infuse more capital into banks so that they can increase their lending and improve their liquidity. As per the Reserve Bank of India (RBI) norms, banks are expected to maintain a capital adequacy ratio ( CAR ) of 9% or higher. All Indian banks have higher CAR than the prescribed limit. However, it seems that the government intends all PSU banks to have a CAR of at least 12% (see table showing the list of PSU banks with CAR of 12% or less). This is what makes recapitalisation different in India from what is happening globally, especially in the US and Europe, where governments have to step in to save the possible bankruptcy due to erosion of capital. Indeed, the move will make PSU banks much stronger than earlier to face any eventuality. However, what is good for banks may not be that good for their shareholders. This is because, when the government infuses more capital into banks, its p...

Eleven banks participated in the mock test carried out by the Bombay Stock Exchange (BSE) for the new IPO payment facility recently permitted by SEBI. The first IPO in which the facility will be used is that of 20 Microns, which opens on Monday. This facility, called the Application Supported by Blocked Amounts (ASBA), allows banks to block IPO application money in the applicant’s bank account till the time of allotment of shares. Only that amount proportionate to the share allotment will be transferred from the account. The markets regulator has said that ASBA will be operationalised from Monday. . This coincides with the opening of the IPO of 20 Microns, the first issue in which the ASBA process will be used by investors. Interface tested “BSE has successfully tested its interface with 11 banks for participation in the ASBA (Application Supported by Blocked Amounts) process,” said a BSE news release. The 11 banks that participated in the mock test were Bank of Baroda, Corporation Ban...