Market Capitalization of all 24 Listed Public Sector Banks below that of 15 Listed Private Banks

The combined market capitalization of all 24 listed public sector banks,which control 73% of bank deposits,is currently below that of the 15 listed private banks.

On 15 November 2011, the combined market capitalization of the 24 public sector banks which include 19 nationalized banks, SBI and its three associates and IDBI was Rs 311877 crore. As against this,the market capitalization of 14 private banks was Rs 321613 crore. This is a reversal of the position at the beginning of 2011. As on 1 April 2011, the total mkt-cap of government-owned banks was Rs 439600 crore much higher than the Rs 374218 crore for private banks.

As on end-June 2011,PSU banks accounted for 74.6% of bank deposits while private sector banks had only 18%,with the rest of the funds lying with regional rural banks and foreign banks.In matters of credit, PSU banks account for 74.9% of bank loans in the country while private banks have only a 17.6% share.

Two bad quarters of 2011-12 for State Bank of India and reports of loan restructuring and NPA worries in public sector banks hit valuations hard.

HDFC Bank overtook SBI to become the most valuable bank in the country.Incidentally,SBI the largest lender in the country has contributed the most to the decline in value of public sector banks.

PSU banks can work around capital constraints in the short-term by consolidation or via a relaxation in norms that require the government to hold a minimum 51% stake.There also exists larger social burden on the public sector banks because of which they have had to restructure large loans. Compared to them the private banks have been selective in their lending and have had far fewer NPAs.