State ‘Bunk’ of India

IIPM MANAGEMENT INSTIT

SBI is junk!

Their bonds at least, if S&P is to be believed

“You can fool some of people all the time, all the people some of the times, but it is not possible to fool all people all the time,” unless of course, you are State Bank of India, ostensibly India’s largest and the most influential bank! Well, the strategy seems to have horribly backfired! Guess what happened to the dear old SBI last week. Standard & Poor’s, the most respected global rating agency, awarded a pathetic ‘junk’ rating (basically, a ‘non-investment’ grading) for SBI’s proposed $225 million bond issue – part of the bank’s $5 billion Medium Term Notes borrowing programme. A non-investment grade now jeopardises not only the entire $5 billion borrowing plan of State Bank of India, but disastrously so, the complete strategy of Indian public sector banks (PSBs) to raise more than $9 billion overseas money in the near future.

But rather than berating S&P, policy makers should realise that SBI’s miserable downgrading by S&P is a true reflection of the redundant policies of the government towards the entire banking system. Think about it! Almost none of the PSBs come close to adhering to the most imperative Basel II norms; and worse is how conveniently RBI, rather than forcing PSBs, has found it easier to shift the deadline of such adherence to 2008 (from 2007). It’s a no-brainer that it is the government that has to be blamed. Be it the recent decision of the Finance Ministry to buy 59% stake in SBI or the minimum government ownership of 51% in all public sector banks, or asking the PSBs to ‘consult’ the Finance Ministry before they make any adjustment in lending rates or the 10% voting rights ceiling in private sector banks, the government has failed in making PSBs worldclass. And now, with SBI investing $1.3 billion in ICICI Bank’s most recent FPO, self-obsessed PSBs seem to have even gained the audacity to go openly against clear RBI norms of banks not having cross-holdings. State Bank of India and junk rating? You bet!

A. Sandeep Editor Business & Economy

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

For More IIPM Info, Visit Below....
ARINDAM CHAUDHURI’S 4 REASONS WHY YOU SHOULD CHOOS...IIPM :- Cicero's Challenge is going global
The Indian Institute of Planning and Management (I...
After CDMA, will nokia miss the 3G bus ?
Time for Awards at IIPM
STUDENTS AGAINST CORRUPTION & KICKBACKS : SACK
HRIC :- Human Resource Intelligence Cell
Heavy dut(t)y stress Sanjay Dutt Bollywood Actor
The Business of B-School Rankings & The Big Farce
36TH Full Time Programme In Planning & Entrepreneu...
Courtney to quit courting cigarettes!