ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Setting the Stage for Bank Privatisation

Whether the move towards eventual privatisation, including transfer of control to foreign banks, is the right prescription for a banking system that has shown an improving trend in efficiency while remaining stable needs to be vigorously debated.

If the Banking Companies Bill intended to carry out amendments to the Banking Companies Act and tabled in parliament in the last session is passed in its present form, it will have set the stage for privatisation of nationalised banks (that is, public sector banks sans the SBI group). Less obvious but quite ineluctable, given the ground realities, is that foreign banks will be key players in the privatisation process.

The government will, of course, not admit as much. It has pointed out that under the amendments proposed, the government’s stake will be at least 33 per cent and that the government’s stake will come down through sale of shares to the public, instead of through strategic sales of the government’s shareholding. The finance minister has been at pains to emphasise that the public sector character of the banks will remain and that the government retains the right to appoint the top management.

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