The government is not considering any proposal to raise the foreign direct investment (FDI) limit in public sector banks to 49 per cent, from the current 20 per cent, Minister of State for Finance Pankaj Chaudhary said on Tuesday.
The FDI limit in PSBs and private sector banks is 20 per cent and 74 per cent, respectively. In case of private sector banks, up to 49 per cent of FDI is through the automatic route and beyond 49 per cent and up to 74 per cent, government route is applicable.
In response to a written question in the Rajya Sabha on whether the government has proposed raising the FDI limit in PSBs to 49 per cent, Chaudhary replied in the negative.
RBI approval for 5% shareholding
Further, as per Reserve Bank of India’s (RBI) Master Directions on ‘Acquisition and holding of shares or voting rights in Banking Companies’, share acquisition of a bank resulting in any person owning or controlling 5 per cent or more of the paid-up capital of the bank, requires prior RBI approval.
Replying to another question, Chaudhary said, the holding of number of shares of Union Government in 12 public sector banks (PSBs) have not declined since 2020.
However, he said, even though the number of shares held by the Union Government has not declined, the respective percentage of shareholding of the Union Government has declined in some of these banks due to raising of capital through issuance of fresh shares by banks.
Fresh capital is raised by the banks to meet their capital requirement for business growth and maintaining regulatory requirement, he said, adding, such capital raising reduces fiscal burden on the Government and strengthen the balance sheet of banks.
Minimum public shareholding
Banks are also required to ensure compliance of minimum public shareholding requirement of 25 per cent under Rule 19A of the Securities Contracts (Regulation) Rules, 1957 and Regulation 38 of SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015, he said.
As per the New PSE policy for Atmanirbhar Bharat issued by the DIPAM, he said, “recommendations shall be made by NITI Aayog with regard to Central PSEs under strategic sectors, which includes the Banking, Insurance and Financial Services Sector, and recommendations shall be considered and Central PSEs to be, inter alia, retained under Government control or considered for privatisation or merger or subsidiarisation with another PSE shall be approved by an Alternative Mechanism that has been approved by the Government.”
It is pertinent to mention that the ease of access to banking services in rural and semi urban areas has been strengthened by ensuring that each of the inhabited village in the country is covered within banking outlet (Bank branch/ BC/IPPB) within a radius of 5-kilometre, he said.