PSU Banks | ‘Acche Din’ of public sector banks, making record profits

Mumbai: In the last few years, PSU banks are continuously getting stronger despite the US rating agencies and many big economists continuously presenting a wrong picture by saying that the condition of India’s public sector banks (PSU Banks) is deteriorating. Banks of India are succeeding in increasing their business and net profit by controlling their NPAs, on the contrary, US banks are drowning in huge losses. India’s entire banking sector has emerged as the strongest in the world and the credit for this is due to the successful policies and efficient leadership of Finance Minister Nirmala Sitharaman and Reserve Bank of India (RBI) Governor Shaktikanta Das. goes. Apart from this, banks are also getting the benefit of India Growth Story. Today, all the PSU banks are earning bumper profits while facing tough competition from private banks, while reducing NPAs, they are also providing dividends and good returns to the investors. Except Punjab National Bank (PNB), valuations of all PSU banks have also come down to attractive levels. Shares of Canara Bank, Bank of Baroda, Indian Bank, Union Bank (UBI), Bank of India (BOI) and Bank of Maharashtra (BOM) are in the range of 5 to 8. Trading at an attractive PE Ratio. Good returns ranging from 29% to 130% in shares recommended by in its article on government banks published on 27 September 2021 ‘Good days of government banks’, described PSU bank shares as attractive from investment point of view Was. Since then, investors in these shares have made a good profit of 29% to 130%. IBC law became a game changer for Indian banks at the time of the pandemic of Chinese virus Kovid, all the rating agencies and many other analysts of the country and abroad had expressed the apprehension of increase in the NPAs of the banks and decrease in profits, but contrary to the apprehensions surprisingly the NPAs of the banks have increased. decreased and profits increased. One of the biggest reasons for this is the introduction of the new IBC law. In May 2016, the Central Government implemented the Insolvency and Bankruptcy Code (IBC) law to overcome the problem of increasing NPAs of banks. After the introduction of this new strict law, many bankrupt companies including Essar Steel, DHFL, Bhushan Steel have gone out of the hands of the defaulting promoters. This has created a fear among the promoters that if they have taken a loan from the bank, they will have to repay it and if they default, the entire company will go out of hand. For this reason, at the time of Kovid, every company promoter first got involved in repaying his old bank loan. As a result, the recovery of old loans increased and despite the Kovid crisis, the NPA also went on decreasing. In this way, the IBC law has proved to be a game changer for the Indian banking industry. Read this also, the new reform agenda ‘Ease’ also helped Apart from this, the government’s new reform agenda ‘Ease’ (Enhanced Access & Service Excellence-EASE) is also helping government banks to increase business. The central government launched a new reform agenda ‘EASE’ in January 2018 to make PSU banks modern and competitive. Ease stands for ‘Enhanced, Access, Service and Excellence’. Its objective was to provide smart banking services by increasing the use of technology. It had 5 themes. Among these, smart landing, 24/7 banking, data enabled agri financing and digital payment are the main ones. This has enabled PSU banks to provide modern banking services and face competition. Now the good days of public sector banks have returned. Good result after many years: Taher Badshah Taher Badshah, Chief Investment Officer of Invesco Mutual Fund, says that the financial year 2022-23 has proved to be a very good year for PSU banks. The kind of excellent results that PSU banks are declaring, such results are being seen after many years. Good growth in loan growth coupled with lower credit costs and higher margins are helping PSU banks grow their business and profits and strengthen their balance sheets. Due to the fast growth of the Indian economy, the credit cycle is also getting faster, which means loan demand is increasing. The benefit of which will be available to the banks in the future as well, although now the margins of the banks can be stable. Credit growth is also benefiting: Prashant Tapse Senior Vice President (Research) of Mehta Equities Ltd. Prashanth Tapse says that the important fact is that the government has spent Rs 10 lakh crore on the country’s infrastructure development. spending target. Due to this, credit growth of PSU banks is picking up. Second, now the cycle of interest rate hikes is over and stability is expected. When interest rates stabilize, the demand for home loans will also increase. In such a situation, the profit of PSU banks is expected to be good this year as well. SBI, Bank of Baroda and Canara Bank are looking best from investment point of view.

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