PM's council wants govt to cut stake in banks to 51%

The Prime Minister's Economic Advisory Council has recommended phased dilution of government stake in public-sector banks, from 58 per cent to 51 per cent, and introduction of on-tap licensing of new banks. In a note prepared last week, the council, headed by C Rangarajan, said the stake reduction would help raise the additional capital required to implement the Basel III norms, meant to strengthen the banking system. Assuming no discount to market price, the government will be able to raise more than Rs 55,000 crore, the council has estimated, adding the pricing of shares should be attractive enough to bring in non-government shareholders. Making a strong case for abolishing the present system of "stop-go" licensing of new banks, the council has said it should be an ongoing process, in which licences can be given whenever the central bank feels an applicant meets the strict eligibility criteria. Apart from deepening the banking system, this will help reduce the fiscal impact of Basel III as the public-sector banks' share in incremental credit creation can be brought down from the current 70 per cent....Read more >> Click here