Holding company for PSU banks to meet growth needs: FinMin secretary
NDTV's Dr. Prannoy Roy and Business Standard chairman TN Ninan talk to the FM about the tax rejig, compulsions of a coalition, the burgeoning fiscal deficit and much more on the government's intentions and targets in the next fiscal.
The Government said the proposed holding company for the PSU banks would help in recapitalizing the lenders for meeting their growth needs and global prudential norms.
"The Finance Minister has said very clearly that we are looking at an alternative option of creating a holding company. We agree that there is a long term need...there is need for long term investment in the banking system," Financial Services Secretary D K Mittal said.
Speaking at the post budget interaction of corporate leaders with the Finance Minister, Mittal said, the Government has asked banks to enhance efficiency so that valuation is improved.
"Today PE (price earnings) valuation is very low because of perception and also because of some reality. So, we would like to (tap capital market) when we get good price from the market. Till that time, Government would be putting in money," he said.
"We assure that all banks would be fully capitalised for meeting Basel III requirement," he added.
In the Budget 2012-13, Finance Minister Pranab Mukherjee had said "the Government is also examining the possibility of creating a financial holding company which will raise resources to meet the capital requirements of Public Sector Banks."
Meanwhile, the government has also proposed capital support of Rs 15,888 crore to public sector banks and financial institutions during the next fiscal to strengthen their capital base.
"For the year 2012-13, I propose to provide Rs 15,888 crore for capitalisation of PSBs, Regional Rural Banks and other financial institutions, including NABARD," Mukherjee had said.
On the new banking licences, he said, Banking Laws (Amendment) Bill, 2011 needs Parliament approval before RBI can come out with final guidelines.
"We hope that the Parliament will pass the Bill in the current session," he said.
Last year, the government introduced the Bill to raise the voting rights of shareholders of nationalised banks to 10 per cent from the existing 1 per cent, a move that will make investment in state-owned banks more attractive.
In addition, the Bill proposes to remove the voting right restrictions of 10 per cent for private sector banks in the total voting rights of all the shareholders of the banking company.
In the case of private sector banks, the voting rights would be commensurate with investors' shareholding.
There are 20 nationalised banks in the country and 22 private sector banks in the country.