Public sector banks on Thursday expressed concerns over a government proposal of raising funds by monetising the blue chip holdings of the Specified Undertaking of the Unit Trust of India (SU-UTI).
According to bankers present,the banks raised certain regulatory challenges and asked for more time to think over the proposal.
The finance ministry had called a meeting of state-owned banks and financial institutions to get them to participate in a complicated deal that involves raising funds by monetising the blue chip holdings of SU-UTI.
According to government sources,the finance ministry expects to raise over Rs 20,000 crore from banks through the deal.
SU-UTI holds 89.67 crore shares in ITC,5.05 crore shares in L&T and 9.72 crore shares in Axis Bank. At todays market price,the total value of these shares is close to Rs 31,500 crore.
This would help the ministry partly meet its Rs 40,000 crore target from disinvestment receipts. So far,the government could manage only Rs 1,145 crore through stake sale in Power Finance Corp. According to sources the government plans to transfer these shares to a holding company.
Banks and institutions can be asked to buy stake in the holding company,and the money so raised can be invested by the holding company in the governments stake sale programme in public sector undertakings (PSUs).
SU-UTI was set up following the repeal of the UTI Act in 2002. It was vested with all the holdings of Unit Scheme-64 (US-64) and other assured return schemes of the erstwhile Unit Trust of India.
Govt to give Rs 17K crore capital to PSU banks
The government is likely to provide Rs 17,000 crore to the public sector banks in the current fiscal to help them meet capital requirements and expand operations.
We will send the proposal on recapitalisation to the finance minister this weekend. For the SBI,the amount is likely to be Rs 5,000-6,000 crore,taking its tier-I capital to 9 per cent. The ministry would seek additional Rs 12,000 crore through supplementary demands in Parliament. This is above the Budget provision of Rs 6,000 crore, a senior finance ministry official said.
According to the proposed Basel III guidelines,the capital adequacy ratio will increase from the present 2.5 per cent to 11.5 per cent by March 2017. In addition,for the first time,banks would have to maintain a leverage ratio.