PSU banks will not perform like their private sector counterparts for many evident reasons. But that doesn't make them a complete no for investment. SBI is the proxy for Indian economy (sure you've heard this many a times).
The Govt of India controls the managements of the PSBs in almost all the aspects. From the calls made by Secretary, DFS to LIC & treasury heads to subscribe to failed FPOs and to ensure support for the various social initiatives of Modi Sarkar. These social programs involve additional costs and no private sector bank does what these PSBs do. Just take a look at the rural/urban branch ratio of private sector banks and you'll see what I'm referring to.
The private sector banks earn a considerable amount of fee from the (mis)selling of products (insurance/derivatives). If you follow some banking news, there have been news of how even some corrupt PSB employees have debited customer accounts for selling insurance without their consent and earned lakhs as incentive.
We could talk a lot about how they go about doing their day to day business. Coming to investment worth of the PSU banks, there will be more competition from the Payment Banks & the new licensees. If you have a realistic expectation of returns with a holding capacity, you can find value in select PSBs. Else you can try find the next multi-bagger and deploy your capital there.
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