Cabinet nods to cut Govt. stake in PSBs

In a significant development, the Union Cabinet meeting chaired by the Prime Minister Narendra Modi has decided to cut the government’s holding in public sector banks (PSBs), on Wednesday.

Cabinet has permitted to the PSBs to dilute its stake to 52 per cent in phase manner. This will allow the banks to raise fund to the tune of Rs. 1, 60, 825 lakh crore from the market, and the fund raising from the market would be in the interest of the banks.

As per the Base III norms, a public sector bank (PSBs)requires equity capital of Rs. 2.4 lakh crore by 2018.

The government of India has major holding and control in 22 out of 27 public sector banks and State Bank of India (SBI) is holding major stake in the remaining five public sector banks.

The total market capitalization of government holding in the public sector banks stands at over Rs.4.19 lakh crore as on May 2014.

The Base III norms are aimed at improving governance and risk management while raising the bank sector’s ability to absorb financial and economic stress. All the PSBs have welcomed the decision made by the Union cabinet to reduce the government’s stake in the public sector banks.