A recent press report said that the Government has asked the public sector banks who are currently extending their business into insurance, which is capital intensive business, are asked to concentrate on their core business. The Government has asked the banks to postpone their plans until the end of this financial year because it has been facing a critical situation of lack of cash and has increased its market borrowing to around Rs. 53,000 crore in the second half of this financial year.
This step of Government would affect banks such as Syndicate Bank, Indian Bank, Central Bank of India and Indian Overseas Bank who have planned to extend their business into insurance but now they have to curtail their plans and delay their plans.
According to a anonymous source it is said considering the current market conditions the banks are asked to preserve their capital resources and utilize them efficiently. As of now they are not suggested to extend their business into some capital intensive business such as insurance as the prevailing conditions are not conducive for such huge investments.
Many large private sector banks such as SBI, Union bank of India, Bank of India, Punjab National Bank, Bank of Baroda and Canara Bank who are already into life insurance business involve themselves into large investment in spite of long growth period.
Banks are facing a slow down in their loan business due to high interest rates. The home loan and other loan borrowers are hesitating to take up loans due to high interest rates.