Financial Daily from THE HINDU group of publications
Saturday, Jan 19, 2002
Public Sector Banks
Money & Banking - Public Sector Banks
Bank privatisation efforts faltering
THE Government plan to bring down its equity holding in public sector banks to 33 per cent is seemingly on the back burner, effectively halting all attempts made at privatising nationalised banks.
Similarly, the RBI move to divest its holding in various public sector institutions such as State Bank of India, National Bank of Agriculture and Rural Development and National Housing Bank (NHB) appears to be on hold.
Two years ago in his Budget speech, the Finance Minister had announced that the government had accepted the recommendations of the Narasimham Committee to bring down Government holding in PSU banks to a minimum of 33 per cent, while at the same time retaining its "public sector character.''
According to top Finance Ministry sources, the divestment, that requires amendments to various Acts, has been completely halted and is now stuck in various Standing Committees of Parliament.
Sources cite a complete lack of political will and opposition from various political parties and bank unions as major reasons for the virtual suspension in activities relating to the divestment.
The RBI had forwarded its recommendations to the Government for comprehensive amendments to the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949.
Banking sources also link the suggestion made by Dr Y.V. Reddy, RBI Deputy Governor, to set up a separate holding company for public sector banks (by transferring the government and the RBI stake) to the standstill on the divestment front.
However, Dr Reddy had clarified that his statement made at the bank economists conference in Kolkata, as a "technical view'' and not an idea endorsed by the RBI.
In the Monetary and Credit Policy of April 2001, the RBI had stated its intention to divest its stake in SBI, National Housing Bank, Infrastructure Development Finance Company Deposit Insurance and Credit Guarantee Corporation (DICGC), Nabard, Bhartiya Reserve Bank Note Mudran Ltd, Discount and Finance House of India (DFHI) and Securities and Trading Corporation of India (STCI).
Though the RBI has written to various banks and financial institutions (FIs) on the divestment of its holding in DFHI and STCI, there has been no concrete move towards divesting its stake from SBI, NHB and Nabard.
An RBI internal committee had submitted its views on the divestment of stake in SBI, Nabard and NHB and was awaiting amendments to various Acts to set the ball rolling for divesting its stake.
The RBI move to divest its take from various institutions follows the recommendations of the Narasimham Committee that RBI should not own the institutions that it regulates.
Send this article to Friends by E-Mail
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line