Govt should bring down stake in PSBs, says Bank of India MD & CEO

Karnatak said that the bank's external benchmark-linked loans (EBLR) are already reflecting the rate cut by the Reserve Bank of India (RBI)'s monetary policy committee (MPC)

The government can look at bringing its stake down in the state-owned banks as the economy is on a growth path and there will be a requirement of capital to fund this growth, Rajneesh Karnatak, MD & CEO Bank of India, said on Friday.

 

He was responding to a query on the government's stake dilution beyond 50 per cent. Currently, the government has a 73.38 per cent stake in the bank. The central government has a 57.43 per cent stake in the country’s largest lender State Bank of India; 70 per cent stake in Punjab National Bank; 64 per cent in Bank of Baroda; 63 per cent stake in Canara Bank; 93 per cent stake in Central Bank of India; 96 per cent stake in Indian Overseas Bank, to name a few.

 

“Consolidation is something which the government has to decide finally. On the equity perspective, it (government’s stake) can be definitely brought down because in the future there will be a requirement for capital as the bank and the economy is growing,” Karnatak said at an event titled ‘IIMK-NSE Annual Conference on Macroeconomics, Banking & Finance’.

 

On the sidelines of the event, Karnatak also said that it was unlikely that the Bank of India will bring down its deposit rates in the current quarter (Q4FY25). The bank will have its asset-liability committee (ALCO) meeting later this month where a decision on the deposit rates and marginal cost of funds-based lending rate (MCLR) linked loans will be taken.

 

Karnatak said that their external benchmark linked loans (EBLR) were already reflecting the cut in rates by the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC).

 

Asked whether the cut in rates will have a bearing on the bank’s margins, Karnatak said, “There will be some impact on the margins because the reductions in rates on the deposit side will take some time. There will be a short-term impact on net interest margins (NIMs) but it will be marginal”. 

 

The six-member MPC of RBI reduced the policy repo rate by 25 basis points (bps) to 6.25 per cent in the February meeting against the backdrop of easing inflation and slowing economic growth, marking the first interest rate reduction by the central bank in almost five years. After the MPC meeting, Swaminathan J, deputy governor, RBI, highlighted that while the transmission of a rate cut is immediate on EBLR-linked loan books of banks, monetary policy transmission to deposit rates and MCLR-linked loans takes about two quarters.