Dilute Govt Shares In PSBs : RBI Panel

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  • According to a report by an RBI panel headed by ex-Axis Bank Chairman, P. J. Nayak:
    • Public Sector Banks (PSBs) were adversely affected due to many externally imposed constraints such as the CVC and CAG among others.
    • Govt should cut down its holdings in public sectors to less than 50% as this will allow the govt to be the dominant shareholder without diminishing its control on banks thereby creating conducive environment for competitions.
    • Govt should repeal the Bank Nationalisation Acts of 1970 and 1980, SBI Act and Subsidiary Banks.
    • All banks should be incorporated under the Companies Act and Investment Company should be set up to which govt holdings should be transferred.
    • Criticizing bank boards, it said they lack a sense of purpose with respect to strategy and risk management. It also said that they are disempowered, and the selection process is compromised.
    • Piecemeal and non-substantive reforms will cause a steep fiscal loss and that govt should incorporate radical reforms.
    • Recommends setting up  a new category of investors called ‘authorized bank investors’ and expand the single investor shareholding caps beyond the current practise of reviewing very stake buy proposal of 5 per cent and above by the RBI.
    • ABIs should be allowed a 20% equity stake without regulatory approval or 15% if it possesses a set on the bank board. Other financial investors should be permitted up to 19%.
  •  Read at: http://www.thehindu.com/todays-paper/tp-business/rbi-panel-for-diluting-govt-stake-in-public-sector-banks-to-below-50/article6006819.ece

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