Govt. may disinvest in PSB's without losing control
The Bank Nationalisation Act would have to be amended so that the definition of ‘Government' includes certain nominated quasi-Government agencies.
Arun S, BUSINESSLINE, New Delhi, Feb.1
The Centre is considering the suggestion of the Prime Minister's Economic Advisory Council Chairman, Dr C. Rangarajan, to allow statutory organisations such as LIC, the Employees Provident Fund Organisation and GIC to infuse capital into public sector banks (PSBs) by buying a portion of the Government's holdings in these banks.
This amounts to disinvestment without the Government losing effective control in the PSBs. This is because the Government will only nominate those agencies, in which it has no intention of divesting, to buy its stake in PSBs.
"This is the thinking that is going on. For this, the Bank Nationalisation Act would have to be amended so that the definition of „Government' includes certain nominated quasi-Government agencies. PSBs will continue to be PSBs, except that the Government won't be holding 51 per cent," a highly placed official told Business Line.
The official said there would be meetings regarding this issue shortly, but added, "it is early days still." The proposals on banking sector reforms were shelved following the global financial crisis. Dr Rangarajan had recently repeated this proposal that he himself had mooted a couple of years ago.
The Government has also decided to revive a study on „match-making' it had initiated a few years ago on public sector banks, based on their assets, work culture and geographic spread, the official said. Currently, the Government's share in PSBs cannot fall below 51 per cent.
The Former Secretary, Economic Affairs and Banking, Mr C M Vasudev, said, "This will improve the capital adequacy of PSBs and enhance their capacity to dispense credit. But the Government will have to manage the politics. Unions may feel this is another step to dilute public shareholding."
The Bank Nationalisation Act would have to be amended so that the definition of ‘Government' includes certain nominated quasi-Government agencies.
Arun S, BUSINESSLINE, New Delhi, Feb.1
The Centre is considering the suggestion of the Prime Minister's Economic Advisory Council Chairman, Dr C. Rangarajan, to allow statutory organisations such as LIC, the Employees Provident Fund Organisation and GIC to infuse capital into public sector banks (PSBs) by buying a portion of the Government's holdings in these banks.
This amounts to disinvestment without the Government losing effective control in the PSBs. This is because the Government will only nominate those agencies, in which it has no intention of divesting, to buy its stake in PSBs.
"This is the thinking that is going on. For this, the Bank Nationalisation Act would have to be amended so that the definition of „Government' includes certain nominated quasi-Government agencies. PSBs will continue to be PSBs, except that the Government won't be holding 51 per cent," a highly placed official told Business Line.
The official said there would be meetings regarding this issue shortly, but added, "it is early days still." The proposals on banking sector reforms were shelved following the global financial crisis. Dr Rangarajan had recently repeated this proposal that he himself had mooted a couple of years ago.
The Government has also decided to revive a study on „match-making' it had initiated a few years ago on public sector banks, based on their assets, work culture and geographic spread, the official said. Currently, the Government's share in PSBs cannot fall below 51 per cent.
The Former Secretary, Economic Affairs and Banking, Mr C M Vasudev, said, "This will improve the capital adequacy of PSBs and enhance their capacity to dispense credit. But the Government will have to manage the politics. Unions may feel this is another step to dilute public shareholding."
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