Ranjan Dhawan, Executive Director of Bank of Baroda says the bank is comfortable in terms of capital requirements for the moment.
In an interview wth CNBC-TV18, Dhawan says the industry is awaiting details on the holding company structure for stakes of state-owned banks, as proposed by the PJ Nayak Committee.
Below is the transcript of Ranjan Dhawan's interview with Ekta Batra & Anuj Singhal.
Ekta: One of the big questions that have come up after the Budget announcement was that the bank recapitalisation figure of close to Rs 8,000 crore is not sufficient for banks at this point in time. Do you have clarity from the government in terms of whether this close to Rs 8,000 crore figure would be based only for performance based public sector undertaking (PSUs), something that we saw in FY15?
A: I imagine going forward that is the trend that would continue that the government would tend to reward the better performing banks with more capital. Mostly the banking sector is comfortable in terms of capitalisation certainly Bank of Baroda is quite comfortable as regards capital. However, there is a lot of headroom to raise additional tier one and tier two capital. Therefore, I do not think there is any pressure on capital in the immediate future. Certainly in the next year or so there should not be any great pressure.
Ekta: The criticism was that smaller banks that require capital would now be left out to dry or there would be a question mark in terms of how they would raise it, for example if you do tap into equity market maybe investors won’t be convinced in terms of buying your shares via qualified institutional placement (QIP) or something. What is your sense in terms of how the smaller banks or the banks that are not that well capitalised or have not met those efficiency ratios, how do you expect them to be capitalised?
A: I can only guess at this. I would imagine that the smaller banks which have not done so well in the future are being asked to put their acts together and put their house in order and I imagine that they will take some time to do so; probably growth may not be such a great concern in some of the lesser performing banks, so I imagine as and when they get their acts together the capital will become more available to them.
Ekta: A question with regards to what came out from the Budget was the Bank Bureau Board. Have you got a sense in terms of what the Bank Bureau Board will do, the timeline of when it will be formed and what we can expect from the holding company as well which was indicated as a long-term objective for the PSU banks?
A: At present the detail regarding the bank holding company are sketchy but if I were to look at what would be the ideal structure, at present the nomination of directors from the boards of the banks are somewhat ad hoc in nature probably the government has a thought to put that on a more scientific and a more professional footing. So, going forward that would be one of the functions of the board and second, there is whole question of the appointment of executive directors and chairman probably if they had a panel of experts who would focus on it in a more comprehensive manner, the appointments would be done a bit better. Holding companies still some way off. I am afraid you will have to ask the government exactly what are their plans, I am not privy to their discussions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
