3 PSU Bank Stocks to Watch

Introduction:

If we look at the mess of Non-Performing Assets (NPAs) in the Indian markets, the major contributors to these numbers are the Public-Sector Banks (PSBs). The history of these NPAs is very old and the Government has also said that the work of government does not include doing business, it is to do governance. And the three stocks that are ahead in the queue of privatization are the Bank of Maharashtra, Bank of India, and Indian Overseas Bank.

Privatization Drive- Ongoing Process:

• Reserve Bank of India (RBI) is on the move now to clean the balance sheet and on building strong books for these PSBs before the privatization push and the work of transferring bad loans to bad banks has also started.
• This is done so that the legacy of bad loans should not continue further for the new private bank which will acquire them.
• The aged employees of these Public-Sector Banks (PSBs) are also provided with attractive Voluntary Retirement Schemes (VRS) which can marginally reduce the workforce load.
• Government is also planning to sell the Non-Core Assets (NCAs) of these banks which are not related to core banking business like AMC business, Life Insurance, etc.
• Government has also committed that there will be no layoffs after the privatization of these banks for the existing employees.
• The banks which are under Prompt Corrective Action (PCA) are advised to submit turnaround plans.

Conclusion:

The major takeaway from this is that the Private-Sector Banks are looking more promising in the long term when compared to the Public-Sector Banks. The current market share of around 65% to 70% of the Public-Sector Banks can be completely reversed in the coming years. Hence, there is a big opportunity for the established Private-Sector Banks through organic as well through inorganic growth in the coming 5-10 years. Do proper study and research before investing in any stocks.