BANKING CAPITAL INCREASING CLOUT OF SOVEREIGN WEALTH FUNDS (SWF)

At a time when Banking capital is scarce and finance capitalism is driving the World, it is but natural to expect foreign money to find its way, to pump ailing weak banks.

About the author

Prof. (Dr.) N. Krishna Kumar Dean State Bank Institute of Leadership (SBIL), Kolkata, INDIA

1.0 Introduction

At a time when Banking capital is scarce and finance capitalism is driving the World, it is but natural to expect foreign money to find its way, to pump ailing weak banks. It is a common knowledge that in the past one decade or so, beleaguered banks due to decelerating economy, raising NPA levels and many other structural impediments were finding it difficult to garner capital. The weaker banks faced the brunt of it. The old generation banks, with myriad governance issues and regulatory compulsions of the nature of Basel III guidelines and the like were finding it very difficult to raise capital, repeatedly.

More specifically, some banks were classified into weak banks and put under Prompt-Corrective Action (PCA) Framework of the Reserve Bank of India. In short, the Prompt Corrective Action or PCA is a framework under which banks with weak metrics on Capital Ratios, Asset Quality and Profitability concerns are put under watch by the RBI. Such classification deems bank as risky and starts corrective actions which majorly includes Capital infusion and probing Governance issues. Accordingly, some Private Banks like Yes Bank, Lakshmi Vilas Bank, Dhanlaxmi Bank, CSB etc. apart from the Nationalised Banks in India like UCO Bank, Indian Overseas Bank have been categorized under PCA framework in the last two-three years. Some of it has successfully come out of it.

2.0 Looking for fresh Capital by Weak Banks