CHENNAI: It was banks that RBI Governor Raghuram Rajan wanted to embark on a balance sheet 'clean-up' exercise, but it's the Foreign Portfolio Investors (FPIs) that seem to be doing a 'deep-surgery' on banking stocks.
As per the latest shareholding pattern, FPIs have reduced stake in 13 out of the 17 public sector banks that have disclosed the data so far. In contrast, FPIs increased their exposure in 6 out of the 8 private banks, as per the data available with the Bombay Stock Exchange (BSE).
Among public sector banks, Punjab National Bank (PNB) took the biggest hit with the number of FPIs reducing from 163 as on March, 2015 to about 65. Their collective stake fell from 16.23% to 2.14%.
Similarly, Oriental Bank of Commerce, Indian Bank, Allahabad Bank, Bank of India and Canara Bank saw significant changes as far as foreign investor exposure is concerned.
On the other hand, FPIs not only held to their stake but also increased them in private lenders like ICICI, HDFC, Federal Bank, DCB, South Indian Bank and IndusInd Bank. However, two banks namely Axis Bank and Yes Bank have seen FPIs paring their stake.
Rising bad loans, increased provisioning and bleak credit growth has been a drag on the banking business, forcing foreign investors to trim their exposure to banking stocks, particularly, state-run.
"There's lesser appetite for such stocks as investors are concerned about the actual extent of NPAs. The trend of foreign investors offloading their exposure may continue as banks are still writing off bad loans," Pranav Haldea, MD, Prime Database told Express.
Interestingly, among public sector banks, where FPIs reduced exposure, life insurers, particularly, Life Insurance Corporation (LIC) have increased their stake significantly. For instance, in PNB, LIC's stake went up from 11.19% as on March, 2015 to nearly 14% now. Likewise, in Indian Bank, OBC, Allahabad Bank and Canara Bank, the state-run insurer's stake went up over the last year.
It's not just FPIs, mutual funds and financial institutions have been cautious with the sector that has been mired in bad loans, lower credit growth and failing asset quality. Owing to increased provisioning, several state-run banks have reported subdued performance for the quarter ended December, 2015.