Moneycontrol
Last Updated : Feb 28, 2018 11:55 AM IST | Source: CNBC-TV18

Value buying may emerge for PSU banks post clarity; like vehicle fin cos: UBS India

Vishal Goyal of UBS India in an interview to CNBC-TV18 said with fraud investigations going on there is a natural tendency of risk aversion by investors. However, after 15-30 days when there is further clarity one could see some value buying in the PSU banking space.

CNBC TV18 @moneycontrolcom

The Indian banking sector's bad loan problem is getting murkier as more skeletons tumble out of Punjab National Bank’s closet. Government has cracked the whip and has asked public sector banks to examine non-performing assets above Rs 50 crore for fraud.

Vishal Goyal of UBS India in an interview to CNBC-TV18 said with fraud investigations going on there is a natural tendency of risk aversion by investors. However, after 15-30 days when there is further clarity one could see some value buying in the PSU banking space.

Near-term one could see certain sectors getting impacted because no banker would like to put his neck on the line by giving extra credit, he said.

When asked if these kind of fraud risks could also happen in private sector banks, he said for that one has to think about how the internal control at various banks work – for most private banks the trade transaction goes through processor and most operations are centralized, and branches don’t have discretion. Therefore the risk like the one that occurred in PNB case is very low.

Moreover, at most private banks there is daily reconciliation of Nostro account with CBS, as well as reconciliation of SWIFT and CBS.

With regards to large steel NPL resolutions under NCLT, he said it could be positive for corporate lenders but with the current negative sentiment in banking space, the good news is getting overlooked.

On the NBFCs, Goyal said they are positive on vehicle financing companies since they are less sensitive to interest rates compared to housing finance companies.

For full interview, watch accompanying video...
First Published on Feb 28, 2018 11:48 am
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