Financial historian Russell Napier not a big fan public sector banks; will never invest unless this happens

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Published: October 27, 2017 2:36:49 PM

Financial historian and strategist Russell Napier is not a big fan of public sector banks. He says that he never invested in PSBs, and will not invest in PSBs in future as well.

(Image: Video grab/Youtube)

Financial historian and strategist Russell Napier is not a big fan of public sector banks. He says that he never invested in PSBs, and will not invest in PSBs in future as well, until government stake goes down. And well, he has a reason for it. In an interview with ET Now, Russell Napier, when asked if he would invest in Indian public sector banks, said, “Never owned a state bank in my life anywhere in the world. I don’t want my capital to be tied up with the social project of the government.”

Speaking in the context of India’s latest move to recapitalise public sector banks with Rs 2.11 lakh crore plan, Russell Napier said that capital with banks is a good thing if it translates into credit growth. However, he said that recapitalisation is not enough, and the government needs to bring their stake down. “They (PSBs) are likely to continue to make mistakes they made before. They are just focused on the short-term relief. PSBs are not prudent at making commercial decisions,” Russell Napier said.

However, Russell Napier said that the problem with PSBs in not India specific but seen globally. “Lack of money growth, lag in investment cycle are not India problems alone, it is global,” he said. The world is creating more bond sponsored credit than bank credit, Russell Napier added. He suggested the Indian government to take bold moves to reform the banking sector as the economy of the country is good.

The government this week announced a massive Rs 2.11 lakh crore to recapitalise the public sector banks reeling under about Rs 9.8 lakh crore of bad loans. The government also said that a series of banking reforms are in the pipeline but did not give details about what those reforms were.

The government is also considering diluting its stake on a priority basis in those banks where its shareholding is above 75% struggling with massive bad assets. As of end-September, the government held more than 75% in eight PSBs — United Bank of India, Indian Bank, Bank of Maharashtra, Central Bank of India, Punjab and Sind Bank, Indian Overseas Bank, UCO Bank and Bank Of India. Proceeds of any stake sale in a PSB, however, may not necessarily be used for fresh infusion into that bank.

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