RBI governor Raghuram Rajan's initiatives may see public banks close valuation gap with private peers

Stock markets throw up many a paradox. But nothing is starker than the valuation gap between the public sector banks and private ones. Of course, there may be good reasons for that, but that may be changing soon if the Reserve Bank of India governor Raghuram Rajan has his way in transforming the banking system treats loans recast and defaulters. The dividend yield on Union Bank is at 6.9% and for Syndicate Bank it is at 9.3% and they trade at nearly half their book value, but HDFC Bank which has a yield of 0.85% is trading at triple the state-run peers. 

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