It gave no financial terms for the deal, in which current management will continue to hold the rest of Validus shares.
ET INTELLIGENCE GROUP: The government’s increasing focus on recapitalising state-run banks and reducing their bad debt has served as a convincing basis for leading mutual funds to enhance exposure in them.
Finance Minister Nirmala Sitharaman recently said that bad loans of public sector banks have collectively declined ₹89,189 crore to ₹8.06 lakh crore during FY19. She said that due to various government initiatives, PSU banks have recovered ₹3.59 lakh crore in the past four fiscals.
Given these factors, there has been consistent increase in investments by mutual funds in the stocks of PSU banks. Shareholding data on the 10 PSU banks merged on Friday showed that mutual funds’ total investments are the highest in the past 18 months. The investments in the 10 banks stood at ₹7,664 crore at the end of the June quarter up from ₹6,796 crore in January 2018.
Canara Bank has the highest investments of ₹4,391 crore, amounting to 58% of total investments of mutual funds in the 10 PSU banks. Relatively better asset quality is one of the key reasons fund houses have been bullish on Canara Bank.
Its merger with Syndicate Bank, which also has relatively better asset quality than other weaker banks merged in the current consolidation drive, should enhance investor interest in the combined entity.
