Specialist in Indian Banking and Economic Research

Hemindra Hazari

Is a Securities & Exchange Board of India (SEBI) registered research analyst with over 25 years experience in the Indian capital markets with a specialization in banking and economy research and has managerial experience of establishing profitable equities business, leading and mentoring analysts.  He has worked with prominent foreign and domestic capital market firms such as UBS, Societe Generale, HSBC, ASK Raymond James  and Karvy Stock  Broking and is a regular guest on business media channels and is respected for his non-consensus view on stocks and the market.

Thematic (Sector/Industry)

<p><strong>Despite the government announcing a US$ 33 bn recapitalization of its banks, the banking regulator has brought 11 government banks under its Prompt Corrective Action (PCA) programme, restricting their operations and growth. In the opinion of this writer, the recapitalization is inadequate for the 11 PCA banks, given their high stress loans, and will not provide them enough capital to grow. Restricting the growth of these 11 banks, which account for a third of lending by government banks, provides a huge opportunity for the new private banks to expand their market share amid weak growth of the industry. Private sector banks have a chance to cherry-pick the liabilities and assets of these PCA banks.</strong></p>

Despite the government announcing a US$ 33 bn recapitalization of its banks, the banking regulator has brought 11 government banks under its Prompt Corrective Action (PCA) programme, restricting their operations and growth. In the opinion of this writer, the recapitalization is inadequate for the 11 PCA banks, given their high stress loans, and will not provide them enough capital to grow. Restricting the growth of these 11 banks, which account for a third of lending by government banks, provides a huge opportunity for the new private banks to expand their market share amid weak growth of the industry. Private sector banks have a chance to cherry-pick the liabilities and assets of these PCA banks.

Shrinking Government Banks, A Growth Opportunity for Private Banks