Investors
in India witnessed banking stocks, especially the public
sector banks taking the top honors in the first half
of 2003. Those who invested in Oriental bank of Commerce
and Punjab National bank saw their wealth appreciate
by as much as 200% and 223% within a year. For most
part of 2001 and 2002, banking stocks were lying low
except for few rallies that couldn't sustain. A host
of problems were plaguing the banking sector of which
the most worrying factor being huge NPAs. But in the
year 2003, it has been a party time for the banking
stocks, with the exception of ICICI Bank, IDBI Bank
and HDFC Bank. Over a period of one year, ICICI Bank
stock had depreciated by 1.6%, IDBI Bank lost its stock
value by 19.6% and HDFC stock was appreciated by a mere
13.8%. Compared to other PSU banks, this growth is very
minimal (see Table 1).
The
passage of the `Securitization and Reconstruction of
financial assets and Enforcement of Security Interest
Act 2002' by the Indian Government gave a new life for
the troubled banking companies. This law allows banks
to takeover the assets of the defaulters and give power
to either dispose them off or transfer them to an asset
reconstruction company for recovery of dues. As on March
2001, net NPAs at Rs. 64,000 cr, accounted for 11.8%
of the advances in the banking sector. Although there
are alternatives available for banks to recover their
NPAs, the Securitization act is expected to help them
a lot in recovering their dues. News reports suggest
that many banks have already issued defaulters with
notices to the tune of several thousand crores, which
have brought many of them to the negotiating table.
Banking experts expect a good amount of NPAs to be recovered
in the next three years. |
