PSBs to remain in ‘public sector’ under Banking Cos Act

Harjeet Ahluwalia

New Delhi, May 7: PUBLIC sector banks (PSBs) will remain “public sector” in character as long as they continue to be governed by the Banking Companies (Nationalisation) Act, even if the government divested its entire equity in them. They will also remain subject to Central Vigilance Commission (CVC) scrutiny.

Finance ministry officials said they had sought legal opinion on the issue of the CVC’s role, once government equity was diluted. According to the advice rendered, they said, the PSBs were not covered by the Companies Act but by the Nationalisation Act. The legislation was framed under the social commitment envisaged in Article 39 of the Constitution. As per the obligations enshrined under the Article, the government was committed to providing a more equitable distribution of economic wealth for the broader good of the country. In that sense, PSBs would continue to discharge the objectives with which they were nationalised.

As such, they were also differentiated from other banks and “stood as a separate class by themselves,” they added.

The government would also retain the power to appoint the chief executives to these banks. This being so, as a body vested with the task of keeping vigil on behalf of the government, the CVC will continue to wield as much power to oversee banks as it does today.

Chief Vigilance Commissioner N Vittal, when contacted by The Financial Express, said he would seek official clarification on the subject.