Government is open to dilute its stake in public sector banks to 52 per cent, Finance Minister Arun Jaitley said and promised more steps to tackle bad loan problems including those involving state power providers.
Government is open to dilute its stake in public sector banks to 52 per cent, Finance Minister Arun Jaitley said on Monday and promised more steps to tackle bad loan problems including those involving state power providers.
“We are willing to look at all other changes including bringing down government equity to 52 per cent (in state-run banks), and therefore giving additional financial strength and teeth to the banking institutions themselves,” he said.
Addressing the 68th Annual General Meeting of Indian Banks Association, Jaitley also said the state-run lenders need to be given independence and should be kept away from any political interference.
“Public sector banks in particular have to be given a lot of independence and an arms length distance from political decision making,” he said.
The Finance Minster said these lenders should be involved in the development agenda of state but their administration has to be guided purely by banking considerations and not for any other collateral considerations.
He said even Prime Minister Narendra Modi has said that no bank should ever receive formal or informal directives from the government and had advised the banks to operate essentially an exclusively on banking considerations.
Jaitely said the government has also professionalised the recruitments of top positions in the banks.
“It no longer depends on discretions of individuals. It is becoming more systematic,” he said.
The minister said the government is making all efforts to give a final shape to the Banking Bureau so that all other personnel-related decision with regards to the banks can also be professionalised.
Among others, the government owns over 59 per cent stake in largest public sector lender SBI, while it has 76.5 per cent stake in IDBI Bank.
In Punjab National Bank also, the government stake is in excess of 59 per cent, while it has nearly 64.5 per cent equity in Canara Bank.
In Bank of Baroda, the government holding is 57.5 per cent, in Allahabad Bank it has over 60 per cent, 61 per cent in Andhra Bank, 64.4 per cent in Bank of India and 81.5 per cent in Central Bank of India.
Jaitley further said the capacity of power generation has hugely improved.
“our distribution networks through the national grids have improved, but the final access is by the state discoms and at the level of state discoms reforms have been carried out in very few states.
“There are four states that are in dire distress as far as their discoms are concerned and four others where the situation is reasonably challenging.
“And therefore, the entire advantage of increased power generations, multiple sources of power generation and a grid across the country all get defeated by this narrow last-mile where reforms have not been carried out,” the Minister said.
Jaitley said the RBI has put those state governments on notice that if they do not charge adequately and make users pay for the power supplied, the banking system at its own peril cannot continue to support them.
“Therefore, it is extremely important that part of the problem of the state discoms requires to be addressed. The Power Ministry is in active discussions with those states and most of them have responded quite positively.
“A meeting was held at the level of Prime Minister and some important changes and reforms in relation to these states where the discoms are distress have been worked out.
“The Power ministry is in the final stages of giving effect to the discussions it had with each of these states…
“These states would have to enter into a discussion and probably an agreement with the Power Ministry and it is only that the kind of relief being worked out in relation to these states would be available to them,” he added.
Jaitley further said the states that “want to fall outside this reform process will then have to suffer at their own policy levels”.
“It would be advisable to all of them to follow the suggestions which is now being given by the Power Ministry so that in the course of next one or two years the distress situation of those states can be resolved.
“The government, being a proactive government, is looking at each of these sectors,” he added.