Business Economy 15 Jan 2019 Govt keen to pare st ...

Govt keen to pare stake in banks to 52 per cent, but capital infusion a hurdle

FINANCIAL CHRONICLE
Published Jan 15, 2019, 2:13 pm IST
Updated Jan 15, 2019, 2:13 pm IST
State Bank of India has already initiated steps for a Rs 20,000-crore share sale through qualified institutional placement.
The government stake will be diluted from the existing 58.53 per cent. (Photo: DC)
 The government stake will be diluted from the existing 58.53 per cent. (Photo: DC)

New Delhi: The finance ministry is keen to take its shareholding in public sector banks to 52 per cent to follow a professional corporate structure, but that can happen only once banks stand on their own with no need for recapitalisation. At the moment, many banks need capital infusion through preferential equity, which rather pushes up the government stake in them than reducing it.

"The first move is to bring the banks to a stage where they would not need recapitalisation. We are serious on bringing the government stake to 52 per cent, but the series of recaps push up the stakes every time. The intent is there in us and the banks, but the NPAs don’t allow us to do it", an official confided.

 

Earlier, a PTI report quoted financial services secretary Rajiv Kumar as saying, "The government is essentially a major shareholder. So, this needs to be aligned to the best corporate practices. The shareholding needs to come down to at least 52 per cent in the first phase. As and when market condition allows, banks will take step in that direction. They have all the permission in hand."

Recently the government announced Rs 28,615 crore of capital infusion in Uco Bank, Syndicate Bank, Bank of Maharashtra, Central Bank of India, Bank of India, Oriental Bank of Commerce and United Bank of India. They all will have board meetings soon to issue equity to government, which will again raise the government stake in them.

Only those banks which are not in need of capital, like State Bank of India or Canara Bank, can fulfill this goal of bringing down the government stake to 52 per cent, that too if the market condition is good for bank stocks, the official said.

State Bank of India has already initiated steps for a Rs 20,000-crore share sale through qualified institutional placement. After this, the government stake will be diluted from the existing 58.53 per cent.

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Location: India, Delhi, New Delhi




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