The finance ministry (FinMin) has virtually put on hold the decision on payment of premium by banks while returning equity to the government. This follows investigation by the Securities and Exchange Board of India (Sebi) on volatility of bank stocks and ongoing changes of top officials in North Block.According to sources, uncertainty related to top level personnel changes has affected decision-making in the finance ministry. Uncertainty over who will head banking division or whether secretary, banking, will be downgraded to that of an additional secretary has affected the decision making process. “It is stagnant,” sources said referring to the issue of banks returning equity to government. The decision has also been withheld due to Sebi investigation into the volatility of bank scrips movement between May 28 and June 2.On May 28, there was a statement from the FinMin that there was no proposal from the government to charge premium on equity return by banks. Subsequently another statement followed on June 2, again from the ministry, that no decision had been taken whether the buyback would be at par.Finance Minister Jaswant Singh on June 9 asked Sebi to submit a report on the movement of banking scrips. The scrips behaved erratically following differing statements from FinMin officials that the government is planning to charge a premium on the return of capital by public sector banks.Sebi has submitted an interim report to the FinMin and the final report is awaited. According to sources, Sebi has identified the role of 5 broking firms in the bank stock volatility scam involving an amount of Rs 40 crore. However no banking division official has been named in Sebi’s report. The market regulator will examine if there is a linkage between scrip movement and FinMin statements. “Sebi will not look at the culpability of banking division officials, it cannot, that is the job of FinMin,” the sources said.
