Strong Psu Banks Set To Move Narasimhan Panel On Govt Stake

The stronger public sector banks will submit a recommendation to the Narsimhan Committee, through the Indian Banks Association (IBA), seeking that the government dilute its holding in nationalised banks to enable them increase their capital.

Although these banks would ideally prefer the government to bring down its stake to zero, in their recommedation to the IBA, they will suugest an indicative figure, asking the government to modify the Act of Parliament to bring down its holdings in these banks to 20 to 30 per cent.

The banks to forward the recommendation are mainly those that have already diluted government stake by going public and are looking to raise additional funds through tier I or tier II capital.

 

The main issue here is that the stronger public sector banks which have already tapped the market now need to raise more capital, said a senior official of a leading public sector bank.

However, if a bank decides to go public, it has to maintain a minimum government holding of 51 per cent, which means that the government has to subscribe to any fresh issue, the official said.

However, in the present scenario, the finance ministry has said it does not have the means to invest additional capital to maintain a controlling stake in these banks.

Hence, many stronger banks are unable to go to the market for a second time.

Among the stronger public sector banks, which have already gone public, the governments share holding presently stands at 59.74 per cent in the State Bank of India, 66.21 per cent in Bank of Baroda, 76.53 per cent in Bank of India, and almost 68.33 per cent in Corporation Bank.

The stronger banks need the additional capital for their operations.

Unless the tier I capital is raised, they are unable to increase our limit for tier II capital also, the official said.

Along with a dilution in its holding, these banks are also hoping for more autonomy, particularly in the areas of upgradation of human resources and technology.