Rbi Pushes Pvt Banks To Float Issues
The Reserve Bank of India has decided not to give four new private sector banks, IDBI Bank, UTI Bank, Centurion Bank and TimesBank, any more extensions for floating public issues to dilute their promoters stakes.
The instruction to the banks to tap the primary market could also boost the capital markets, which remained dull during the past fiscal. Last Thursday, RBI deputy governor S P Talwar and several other central bank officials had a closed door meeting with the chiefs of the four banks.
Among the nine banks that have been issued private sector banking licences, ICICI Bank, IndusInd Bank, HDFC Bank, Global Trust Bank and Bank of Punjab have already made a public offering of their equity.
The licences were issued on the condition that the promoters would have to dilute 60 per cent of their holding through public issues. Initially, the banks were required to float issues within two years of commencing operations, which was later relaxed by a year due to the market conditions.
According to senior bank officials who attended the meeting, The RBI is very keen that the banks widen their equity base... within this fiscal itself.
Despite the depressed primary market conditions last fiscal, issues floated by the banking sector had received a good response. Although the bank chiefs present at the meeting cited the depressed capital markets condition for their failure to float public issues so far, RBI officials reportedly countered that Issues floated by the banking sector have historically been successful despite a lull in the market.
According to a study by Prime Database, fiscal 1997 saw a 92 per cent decline in the number of primary market issues and a 75 per cent fall in the amount raised through them, compared with the previous year. Only 62 issues hit the primary market in 1997-98, raising Rs 2,885 crore compared with 753 issues and Rs 11,648 crore in 1996-97.
Banks and FIs mobilised Rs 2,492 crore, or 86 per cent of the total amount raised from primary issues in 1997-98.