The government can also individually exempt the PSBs, that are to be privatisated from the two Bank Nationalisation Acts. This will bring such lenders under Banking Regulation Act, and make them companies, reports Nikunj Ohri.
Unlike any other national asset, which is typically sold to the highest bidder, the profile of the bidder is the most important criterion for a licence to bank, and even for acquiring more than 5 per cent stake, explains Tamal Bandyopadhyay.
Merely bringing down the government stake below 51% may not find any taker for the PSBs. The government must bring down its holding to at least 26%, recommends Tamal Bandyopadhyay.
These changes will entail a relook at the various laws governing banks in the country - the two Bank Nationalisation Acts (passed in 1970 and 1980); the State Bank of India (SBI) Act of 1955; and the Companies Act of 2013.
Of the three major Budget announcements related to the banking sector, privatisation of PSBs is the most audacious, says Tamal Bandyopadhyay.
A Bank Investment Company to act as a holding company for state-owned banks would go a long way in minimising government interference and improving governance.
While the formation of a holding company will not outright privatise State-owned banks, officials believe it will help the Centre deflect criticism arising out of the latest banking scams.
In a soon to be published book, 'Of Counsel: The Challenges of the Modi-Jaitley Economy,' former chief economic advisor Arvind Subramanian says though RBI has a good reputation, it does not mean it's always right, as for years, the RBI was unable to grasp the seriousness of the loan repayment problems or identify the prolonged frauds of Nirav Modi and the likes.
The government is considering a proposal to privatise some state-owned banks in phases.
Banks will need more funds, as they have to provide more capital.
'The macro-economic stresses -- high interest rates, rupee depreciation and capital flows -- have receded now.' 'Interest rates have come down, inflation is down and the rupee has bounced back.' 'If oil prices continue at this level, there will be no vulnerability.' 'Growth is a different story.'
With certain quarters demanding privatisation of public sector banks in the aftermath of the alleged fraud at Punjab National Bank (PNB), Economic Advisory Council to the Prime Minister chairman Bibek Debroy tells Sanjeeb Mukherjee, Ishan Bakshi and Indivjal Dhasmana that reducing government equity even to zero would not mean giving up of government control over these banks.
The need to allow government shareholding in public sector banks to come down below 51 per cent
The incidence of corruption cases can be checked to a large extent if the suggestions already available with RBI and the government are taken seriously, says Shyamal Majumdar.
If this Budget was not packaged and sold as a Budget for the poor and for farmers, Narendra Modi would have lost the next election.
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