27 PSB’s lost 1.14 Lakh Crores in 4 years.

27 PSB’s lost 1.14 Lakh Crores in 4 years.


27 Public Sector Banks have written off 1.14 lakh crores of bad debts in the last 4 years. Here is the efficiency of the banking sector in the hands of the government management. It is disturbing to realize the poor condition our banks are being managed. On the other hand the private sector counterparts are doing good business. What does this mean? Very poor competency among the PSB management, next to zero responsibility in delivering results.

Couple of days back there was a question to me; SBI has come down to 200 from 320, can we buy? The reason behind this thought was that, the SBI stock had been at a higher price very recently, now it has fallen and hence it is cheap. The answer I gave was, the price was at 320 was for a reason and it is the same when it is at 200, now. It is not cheap. In a couple of days from this discussion, SBI stock price came to 160, and again there was the question, now that it is at 160 can we buy now?

What this indicates is, that people of India have developed so much confidence on this bank; it has been part and parcel of their life for generations. Little do they know that, what was in the early days is history, there was no competition, though the management did not have the competency or responsibility, they had the advantage of opportunity at their hands, they got some of the best and some that were useless too, on the whole they made money.

Now the situation is different, private banks are giving this irresponsible bank management a run for their money. All the quality assets have gone to the private players because of the quality and service they provide. Now, the left over business is crap and that is where these PSB’s are rolling their funds. Very soon all the confidence that the citizens of India have on SBI or the PSB’s on the whole will vanish into thin air.

In our portfolio, we don’t have banking exposure since 2013. It was very early for us to move away from banking investments, the reason we got out was because our system did not qualify banks for investment, and their growth was fairly lower in comparison to companies that were showing super strong growth. Hence, our investments moved to those quality assets and now, when the whole market is weak, our portfolio is even more safe as we have moved off from equity exposure to a fair extent, thus keeping the capital protected in times of turbulence.

Our portfolio is 30% in Equity and 70% in short term debt, making the capital safe when the markets are weak.

About Author

Ramesh Sigamani

Ramesh Sigamani

With over 3 decades of experience in capital market investments, Ramesh Sigamani is a trusted Financial Planner par excellence. He works personally with individuals and corporates to build a strong investment portfolio that stands firm against market volatilities and delivers time & time again.

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Comments ( 4 )

  • Avatar
    D S Ramesh

    Following the publishing of this post, SBI announced its Q3 results and it had a 62% drop in profits due to high provisions. Bank is having 40K Crores of NPA’s & other income contributes to more than 65% of total profits reported. All of these numbers show the quality of this bank on its assets.
    SBI has put people’s trust at jeopardy. It’s time government re-thinks on the management restructure, having incompetent management will only deteriorate the performance further.

  • Avatar
    Anurag Gupta

    Very well crafted. I completely agree. Even i have a fear what will happen when people will lose complete trust on SBI.

    In Rural india people mostly have SBI accounts only.

    • Ramesh Sigamani
      Ramesh Sigamani

      Not to worry, there will not be a big change, what is required is quality management, which is competitive enough to face the on going challenges and spot opportunities with zeal. As long as it takes for this change to happen, the very same people who have built so much of trust on this Bank have to wait with patience.

  • Avatar
    Ramesh Sigamani

    News article in the Economic Times today, 23rd Feb 2016, titled “PSB mergers top priority among bank reforms”, big fish acquiring small fish, while both are sailing is the same sea of NPA’s, it is just time before all the non-performing banks will get washed clean from the financial arena of the Indian economy.
    SBI Chairperson, Mrs. Arundathi Battacharya has stated that, “the standards of qualification for projects have become too strict with them” and she allays fear over Capital, Growth. Not to worry any change will look to be a big challenge in the beginning, if we succumb, it will gobble us, if we fight it out, we will naturally win.
    It is time that SBI, acknowledges poor performance and gets more responsible and determined to give quality. Chances are, if the management is determined, we will see a turnaround in this stock.

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