Govt stake in PSBs belongs to people of India, won’t be shed at sub-value: Sinha
4 Jan 2015 10:39 PM GMT
The Government made it clear on Saturday that any decision to undertake a stake sale in public sector banks will be so for an ‘appropriate valuation’. “It is our responsibility to ensure that if we’re going to dilute our stake, which is the stake of the people of India, we’ll do it at an appropriate valuation,” Minister of State for Finance Jayant Sinha said on the sidelines of the two-day bankers’ conclave at the NIBM here.
“We’re certainly not going to do it at a valuation that will result in too much dilution for the people of India,” ha added. Sinha, however, declined to give a timeline for the stake sale even though the Union Cabinet recently decided to reduce the Government stake in the 27 PSBs down till 52 per cent as against the current red line of 56 per cent.
“We’re absolutely vigilant on that matter. We completely understand how markets operate, how valuations are set and we’ll take all of that into account when we take decisions, when we dilute our stake,” Sinha, a former private equity fund manager, said. In the recently released Financial Stability Report, the Reserve Bank had flagged concerns over the compressed share prices of the state-run banks.
“Capital raising efforts by PSBs other than the capital infusion by the government, face challenges because of their relatively low equity valuations compared to their private sector peers,” it had said. The need for dilution has arisen as a result of the higher capital required for meeting the Basel-III norms by April 2019 and the pressure on state finances.
The government has a Rs 11,200 crore capital infusion budget for the current fiscal and speculation is on if the government will exceed this given the needs of the banks. “The government is fully committed to supporting and providing all of our financial institutions, whether they are banks, insurance companies, NBFCs, with the capital that they need to be able to provide the liquidity and the credit to the economy which needs to grow,” he said.
“We’re certainly not going to do it at a valuation that will result in too much dilution for the people of India,” ha added. Sinha, however, declined to give a timeline for the stake sale even though the Union Cabinet recently decided to reduce the Government stake in the 27 PSBs down till 52 per cent as against the current red line of 56 per cent.
“We’re absolutely vigilant on that matter. We completely understand how markets operate, how valuations are set and we’ll take all of that into account when we take decisions, when we dilute our stake,” Sinha, a former private equity fund manager, said. In the recently released Financial Stability Report, the Reserve Bank had flagged concerns over the compressed share prices of the state-run banks.
“Capital raising efforts by PSBs other than the capital infusion by the government, face challenges because of their relatively low equity valuations compared to their private sector peers,” it had said. The need for dilution has arisen as a result of the higher capital required for meeting the Basel-III norms by April 2019 and the pressure on state finances.
The government has a Rs 11,200 crore capital infusion budget for the current fiscal and speculation is on if the government will exceed this given the needs of the banks. “The government is fully committed to supporting and providing all of our financial institutions, whether they are banks, insurance companies, NBFCs, with the capital that they need to be able to provide the liquidity and the credit to the economy which needs to grow,” he said.
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