Prajna Capital - An Investment Guide

Banks With Low Capital To Be Merged With Comfortably-Placed Ones; Govt Holding Too Will Be Key Guide PUBLIC sector banks ( PSBs ) with a low capital adequacy ratio ( CAR ) may be merged with the ones which have high CAR to ensure that there is no strain on the capital of that particular bank. The proposal, submitted by the Committee on Financial Sector Assessment ( CFSA ), has found favour with the government, which is the majority shareholder in all the PSU banks. CAR is the ratio of capital that a bank has to keep aside before extending any loan that has risk attached to it. The government has favoured the committee’s proposal of merging a bank having less capital with another bank having comfortably high capital The final decision in this regard will be taken by the board of the banks involved. Also, there is a likelihood that the government would opt for the merger of a bank where government shareholding is more with a bank with lesser government shareholding. The government cannot...