Business

No proposal to dilute Govt. stake in PSBs to below 51 p.c.: FM

NEW DELHI: Ruling out lowering of government stake in public sector banks, Finance Minister P. Chidambaram on Tuesday asserted that there was no uncontrolled inflow of foreign capital into Indian banks.

“It was the previous NDA Government that had announced reduction in government equity in public sector banks to 33 per cent. When the UPA came to power, I made it clear that it will not be reduced to below 51 per cent and that stands. There is no proposal to reduce government equity to below 51 per cent,” he said replying to supplementaries by members during Question Hour in Rajya Sabha.

Prime Minister’s Economic Advisory Council Chairman C. Rangarajan had suggested that the Government may have to either bring in additional capital in public sector banks or reduce its share to below 51 per cent to ensure rapid growth of PSU banks.

The Finance Minister told the House that there is no proposal under consideration to amend the statutory or other provisions for enabling government to bring down its shareholding in these banks to below 51 per cent.

On the issue of surge in the foreign capital inflow, he said there was no uncontrolled inflow (of foreign funds) into the banking sector. The RBI has laid strict guidelines including a cap on FII and individual investments at 20 and five per cent, respectively. “There is no rush of capital in the banking system,” he added.

Mr. Chidambaram said that there were large inflows into other sectors. The increased foreign capital was mainly due to increase in export earnings, remittances, FDI, foreign institutional investments and private equity. But if large inflows gave rise to inflationary expectations or inflation, the RBI will have to make changes in monetary policy that will be reflected in bank rates, the Finance Minister said.

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