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Finance Ministry asks PSBs to slowly bring down govt's stake to 52%

15 Jan 2019 Evaluate

In order to align with the best corporate practices, the Finance Ministry has asked the public sector banks (PSBs) to slowly bring down the government's equity to 52 percent in the first phase. The government is essentially a major shareholder, so this need to be aligned to the best corporate practices.  

Dilution of government stake will help banks to meet 25 percent public float norms of market regulator Securities and Exchange Board of India (SEBI). Some of the PSBs have government's holding beyond 75 percent. Besides, it will encourage the banks to follow the prudential lending norms. The country's largest lender State Bank of India (SBI) has already initiated step for Rs 20,000 crore share sale through qualified institutional placement (QIP). Post QIP, the government stake will be diluted from the existing 58.53 percent.

Recently, shareholders of the bank approved sale of shares to fund the business growth. Many other banks are planning to raise capital through some means or other, depending on the market condition. The government has also initiated consolidation of Regional Rural Banks (RRBs) along with the public sector lenders and intends to bring down their number to 36 from the existing 56. 

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