Making it clear that the Government will not able to give more than Rs 8,000 crore in terms of additional capital support during the current fiscal, the Finance Ministry on Tuesday asked PSU banks to explore the possibility of setting up holding companies and Special Purpose Vehicles (SPVs) to raise funds for expansion.
Meanwhile, bad loans or non-performing assets situation of state-owned banks improved to 4.44 per cent for the three-month period ended March 2014 as against 5.07 per cent at the end of December 2013.
This was stated by Financial Services Secretary G S Sandhu after Finance Minister P Chidambaram took stock of annual financial performance of government banks here. Sandhu said various options like ESOPs, SPV model and holding company model were discussed during the meeting by which banks could raise funds from market to meet their capital requirement.
However, no decision on any of the options was taken in want of clearances from regulators like SEBI and IRDA. “We have been telling banks that they should come out with out-of-box options...Because they will also have the responsibility to raise funds from the markets,” he said.One option, he said, a bank could set up an SPV to which it will transfer its real estate assets. The bank then can pay rental or lease to the SPV to create an income stream for the SPV.
“Based on this income stream, the SPV will raise money from the market,” he added. Under the bank-wise holding company model suggestion, he said, the bank will transfer all its subsidiaries to the new company which in turn can tap market for funds. “RBI has approved it (holding company model). We are waiting for Sebi's reply then we will go ahead,” he said. Another option, he said is perpetual bond route to raise capital.