FinMin for Cabinet nod to use sell-off fund to capitalise PSBs

Comments 0
Summary* Ministry also plans to use proceeds to maintain majority share in PSUs

The finance ministry would seek Cabinet approval to use disinvestment proceeds to re-capitalise public sector banks as well as maintaining majority equity in Central public sector undertakings.

A proposal from the ministry’s department of disinvestment (DoD) says that the share-sale earnings parked in the National Investment Fund (NIF) be allowed for pumping capital in state-run banks to make up for their excess disbursements in the social sector.

The ambit of the NIF, at present is restricted to use the fund in social sector programmes or to bail out sick PSUs, would be enlarged to use the monies in keeping government share at the majority mark in case a PSU raises equity capital from the market, and in the process, lowers government holding below 51 percent. The balancing act would be done through subscription to the rights issues of the public sector companies and through preferential shares of public sector banks.

The DoD proposal, circulated to other ministries last month, says that the NIF remodeling would apply only from the next financial year and would involve doing away with the asset management companies of LIC, UTI and SBI. In their place would be an inter-ministerial group headed by the disinvestment secretary to apportion the utilisation of divestment receipts that are transferred to the fund.

The government decided to constitute the NIF in January 2005 for parking the realisation from sale of minority shareholding of the government in profitable PSUs. The fund is maintained outside the Consolidated Fund of India.

New Plan

* A department of disinvestment proposal says that the share-sale earnings parked in the National Investment Fund be allowed for pumping capital in state-run banks

* The ambit of the NIF, at present restricted to use in social sector schemes or to bail out sick PSUs

* The balancing act would be done through subscription to the rights issues of the PSUs and via preferential shares of PSBs

Ads by Google

More from Business

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...