Government may consider stake cut in banks to 52 percent, says Jaitley

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Amid continued concerns about levels of non-performing assets, or bad debts, of public sector banks, finance minister Arun Jaitley said on Monday that the government may consider reducing its stake in them to 52 percent.

Addressing the annual meeting of Indian Banks’ Association in Mumbai, he also said state-run banks have to be freed from political interference in decision-making and their decisions should be based only on banking merits.

“Efforts are on to give shape to the banking bureau and to professionalise all personnel issues. We are willing to look at changes..we have appointed a panel headed by Justice A.P.Shah to find options of hiring best quality talent,” he said.

Taking the first step towards a holding company structure for state-run banks, the government last month announced the setting up of a Banks Board Bureau that will recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with issues of stressed assets.

Jaitley has allocated Rs.7,940 crore in the budget for recapitalisation of public sector banks in this fiscal.

The union cabinet had in December allowed state-run banks to raise up to Rs.160,000 crore from the capital markets by diluting the government stake in phases to 52 percent.

As per an estimate, public sector banks would need additional capital of up to Rs.240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.

“The bankruptcy code draft will be put out by early next month and would be taken to parliament from there.Resolution of disputes with relation of contracts law will be passed by the end of the fiscal,” he added.

Jaitley also revealed that the government was getting ready to unveil a draft for a bankruptcy code by early October.

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