India to substantially reduce govt. stakes in state banks

NDTV, Nov 24 – The Indian Government will cut down its stake holding in public sector banks from 51 per cent to 26 per cent, a move which will help bring in public investments in these banks.

To enable this, the government will introduce the Banking Laws (Amendment) Bill 2021 in the forthcoming Winter session of Parliament, which begins from November 29. It plans to privatise two public sector banks through the proposed legislation.

According to the purpose of the bill, in order to privatise two public sector banks, amendments need to be made in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 as well as incidental amendments are required to be made in the Banking Regulation Act, 1949.

The bill is listed for introduction, consideration as well as passing during the forthcoming Parliament session.

Sources said that the move will also help in better realisation of value from the government stake sale.

The decision aims to help government controlled banks to raise capital from the market and reduce their dependence on the public exchequer for capital. Also it will allow the government to use this money for development programmes, sources informed further, apart from helping in meeting the disinvestment target.

A scheme for privatisation of public sectors banks in consultation with Reserve Bank of India (RBI) is also being planned, sources added.

The government is also aiming to make the boards of public sector banks more professional by bringing in greater expertise at the managerial level, with better remuneration and longer tenures.

Finance Minister Nirmala Sitharaman while presenting the Union Budget for 2021-22 22 had announced the privatisation of two public sector banks as part of the government's disinvestment drive to garner Rs. 1.75 lakh crore in the current fiscal.