Finance Minister Arun Jaitley on Monday indicated that the government is open to the idea of reducing its stake in public sector lenders to 52 per cent and spoke about the need to give them independence and protection from any political interference.
“We are willing to look at all other changes including bringing down government equity to 52 per cent in PSU banks, and therefore giving additional financial strength and teeth to the banking institutions themselves,” he said while addressing the annual general meeting of Indian Banks’ Association here. The government owns 59.15 per cent stake in SBI, 76.5 per cent stake in IDBI Bank, 57.5 per cent in Bank of Baroda, 59 per cent in PNB, 64.5 per cent in Canara Bank, 60 per cent in Allahabad Bank, 61 per cent in Andhra Bank, 64.4 per cent in Bank of India and 81.5 per cent in Central Bank of India.
“Public sector banks, in particular, have to be given a lot of independence and an arms-length distance from political decision making,” he said. The finance minster said these lenders should be involved in the development agenda of state but their administration has to be guided purely by banking considerations and not for any other collateral considerations.
Jaitley said the government is making all efforts to give a final shape to the Banks Board Bureau (BBB) so that all other personnel-related decision with regards to the banks can also be professionalised. The government has asked the Justice AP Shah committee to look into grievances of PSU banks for alternatives in recruitment and how a level playing field can be created in the banking sector, he said.
He said even Prime Minister Narendra Modi has said that no bank should ever receive formal or informal directives from the government and had advised the banks to operate essentially and exclusively on banking considerations. The government has also professionalised the recruitments of top positions in the banks, he said. “It no longer depends on discretions of individuals. It is becoming more systematic,” he said.
Jaitley also promised more steps to tackle bad loan problems including those involving state power providers. State-owned lenders have struggled to recover much of the bad debt piling up on their balance sheets using available mechanisms because of the lack of a bankruptcy code. “Four states are in dire straits… because reforms in the power sector have not been done,” he said.
“The capacity of power generation has hugely improved. Our distribution networks through the national grids have improved, but the final access is by the state discoms and at the level of state discoms reforms have been carried out in very few states. There are four states that are in dire distress as far as their discoms are concerned and four others where the situation is reasonably challenging,” he said.
“And therefore, the entire advantage of increased power generations, multiple sources of power generation and a grid across the country all get defeated by this narrow last-mile where reforms have not been carried out,” Jaitley said.