The government is exploring various options — including using proceeds of the dilution of its share in certain public-sector banks (PSBs) and floating bonds — to infuse capital into PSBs, according to principal economic adviser in the finance ministry, Sanjeev Sanyal.
The number of the PSBs could be reduced to 10-15 from the current 22 as part of the effort to ensure bank consolidation to create a few large banks that can compete globally, Sanyal said on Friday at the India Economic Summit organised by the World Economic Forum and the Confederation of Indian Industry.
The government is considering various options conscious of the fact that PSBs, struggling with massive bad loans, would require much more capital than the budgeted level of Rs 10,000 crore for 2017-18. As of end-March, the government held more than 75% in seven PSBs — United Bank of India, Indian Bank, Bank of Maharashtra, Central Bank of India, Punjab and Sind Bank, Indian Overseas Bank and UCO Bank. It has to dilute its share to below 75% by August 2018 to comply with a minimum (25%) public-float norm.
As part of its Indradhanush plan, the government was supposed to provide Rs 70,000 crore over a four-year period through 2018-19 (Rs 25,000 crore in each of the first two years and Rs 10,000 crore in each of the last two years) for the capitalisation of PSBs.
While the government has agreed to offer more support, in keeping with the latest policy, any such capital infusion will be tied to strict conditions, including effective management of non-performing assets (NPAs), sale of non-core assets, further closing of loss-making branches and temporary trimming of employee benefits, if required.
The IBBI has also amended the rules for information utilities, providing more leeway for setting up such entities.
Now, a listed Indian company can hold up to 100% stake in an information utility which stores financial information that helps to establish defaults as well as verify claims expeditiously. With the latest amendments, a person can, either alone or together with persons acting in concert, have a maximum of 51% stake in an information utility for up to three years from the date of its registration.
Besides, an Indian company listed in India can hold up to 100% of the paid-up equity share capital or total voting power of an information utility for three years from the date of inception. Prior to these amendments, a person was allowed to hold up to 51% stake in an information utility for a maximum of three years.