Disinvestment funds may be used for bank recapitalisation from FY14
The proposal comes in the wake of the finance ministry’s attempt to work out a more productive use of funds from PSU stake sales which were earlier used to finance capital needs of social sector schemes.
The proposal mooted by department of disinvestment has garnered support from the other departments of finance ministry. The disinvestment proceeds will be used to subscribe to the shares of public sector banks and insurance companies on rights basis and for preferential allotment of shares in order to ensure 51% ownership of the government is not diluted.
The EGoM, apart from finance minister will comprise the minister of corporate affairs, minister of department of public enterprises, deputy chairman planning commission and the minister in charge of the public sector bank, the public sector enterprise or the insurance company recipient of the disinvestment funds.
Originally the disinvestment proceeds were channelised into the National Investment Fund which is maintained outside the Consolidated Fund of India. The fund is professionally managed by LIC, UTI and SBI. The framework allows 75% of the annual income of the fund to be used to finance social sector schemes. The residual 25% will be used to meet the capital requirement of profitable PSUs. Faced with financial
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