PSBs should not make takeover statements now: House panel

Kolkata, Jan 28 | Updated: Jan 29 2005, 06:12am hrs
The parliamentary committee on banking wants different public sector banks (PSBs) to restrain from making any statements on their takeover plans, till the bill allowing amalgamation of such banks gets the Parliament approval.

A committee member, on condition of anonymity, told FE that the panel feels that

Reserve Bank of India (RBI) and Indian Banks Association (IBA) should instruct all PSU banks, not to make any takeover statement.

According to the panel, the Securities & Exchange Board of India (Sebi) should also give a similar instruction to those banks, who are either listed on the stock exchanges or bringing out initial public offerings.

Just as Sebi bars management of listed companies from making forward -looking financial statements, similarly they should bar listed banks from making such takeover statements without constitutional standing, since in both cases, movement of stock prices gets affected, the member said.

The panel is expected to forward a recommendation in this regard to the Union finance ministry shortly. The member said that such takeover statements create confusion among public and the bank employees.

According to him, the process to facilitate amalgamation of PSBs is complicated and lengthy.

First, the Union Cabinet will have to promulgate a new act, which has to be cleared by Parliament. Subsequently, major amendments will have to be made in the Banking

Regulation Act and Bank Nationalisation Act. All these cannot be completed overnight, he said.

He also said that even some other PSBs, which are not in the merger race, are opposed to such takeover statements.

Some even complained that a few banks are deliberately making such statements to give an upward push to their respective share prices. We are verifying the validity of such complaints. Three banks, one being Kolkata-based and the other two, Mumbai-based are already under our scanner, the panel member said.

United Forum of Bank Unions convenor Ashoke Kumar Dutta told FE that the initiative was welcome. Such rumours are adversely affecting the banking industry and employees concerned are getting demotivated, he said.