Private sector banks which are on a firm footing could well get re-rated after the government allowed to participate in government businesses. The business operations linked to the government were so far the forte of public sector lenders.
“It is a positive development for the private banks after the govt lifted the embargo on the grant of business to private banks. This would bring more competition in the sector, and it will also increase the reach of a lot of govt. initiatives to people,” says Gaurav Garg, Head of Research at CapitalVia Global Research Limited told Moneycontrol in The Market Podcast.
A press release issued by the Department of Finance Services (DFS) earlier this week said the private sector banks can be involved in "conduct of government-related banking transactions such as taxes and other revenue payment facilities".
The largest players in the private lending space such as ICICI Bank, HDFC Bank, and Kotak Mahindra Bank are going to get benefitted as they have a large retail client base, says Garg. But, at the same time he highlighted that PSU banks could come under pressure.
He further added that a re-rating is something that is on the card. Long-term investors can look at accumulating private-sector lenders on dips.
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