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Thursday, Jan 09, 2003

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RBI for 33 pc Govt holding in PSU banks

Our Bureau

MUMBAI, Jan. 8

THE Reserve Bank of India is of the view that the Government should immediately bring down its shareholding to 33 per cent in nationalised banks to enable them to raise fresh capital from the market.

According to Mr G.P. Muniappan, Deputy Governor, Reserve Bank of India, facilitating banks to raise enough funds from the market is imperative as they are unable to meet their capital requirement through subordinate debts alone.

There is a need to expedite the proposed amendment to the Banking Companies (Acquisition and Transfer of Undertakings) Acts, enabling the nationalised banks to bring down the Government shareholding from 51 per cent to 33 per cent, Mr Muniappan said.

Addressing bankers and mediapersons at the annual day function of the National Institute of Bank Management in Pune, on Monday, Mr Muniappan said, "Sixteen public sector banks have accessed the capital market so far, reducing the share of Government holding in these banks. The headroom available to raise further capital by these banks is limited.

Banks have, in recent years, placed greater reliance on subordinated debt to meet the increased capital requirements. However, scope for raising capital through subordinated debt is also limited in view of the prudential limit that subordinated debt cannot exceed 50 per cent of Tier I capital.

"Added to this, there is a constraint for public sector banks to raise capital from the market. The Narasimham Committee on banking sector reforms highlighted the fact that recapitalisation of public sector banks is costly and in the long run, is not a sustainable option.

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