The Telegraph
Since 1st March, 1999
Email This Page
Bank selloff spadework begins

New Delhi, Nov. 4: The government plans to divest 26 per cent of its shareholding in state-run banks and has directed the standing committee on finance to examine the proposal.

Sources said the committee is regularly holding meetings with the chiefs of state-run banks to decide on the modalities for the divestment process. It is scheduled to submit its report by the first quarter of the next financial year.

“As this is a sensitive issue, it has asked the standing committee on finance to minutely study the proposal, hold meetings with investment bankers and state-run bank officials, and accordingly compile the report,” he said, adding that the divestment would help the government shore up its finances in 2004-05.

However, banking secretary . S. Sisodia refused to comment when asked about the divestment process. “There is an appropriate time and we will announce then,” he said.

In June, some banks had proposed to return a part of equity capital to the government to boost their earnings per share.

However, the move was virtually dropped after the government could not decide whether to offer the buyback at the share's face value or at the market price.

Bank officials said they would decide the time of returning the capital after the Centre came out with a clear policy decision.

While Bank of Baroda had proposed to return capital worth Rs 91.9 crore, Delhi-based Punjab National Bank planned to give back Rs 130 crore worth of capital.

“To avoid all these problems, the government has decided to divest a part of its stake which is also in line with its divestment policy,” he said.

In February, the government had agreed to the Reserve Bank of India's (RBI) proposal to allow the central bank to divest its stake in the State Bank of India, National Housing Bank and National Bank for Agriculture and Rural Development (Nabard).

The RBI currently holds around 55 per cent in the country's largest commercial bank, which reported a net profit of Rs 3,105 crore in 2002-03, up 27.7 per cent over the previous year.

Email This Page