Financial Daily from THE HINDU group of publications
Saturday, Oct 30, 2004
Financial Daily from THE HINDU group of publications Saturday, Oct 30, 2004 |
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Private Banks Money & Banking - Mergers & Acquisitions Government - Financial Policy Foreign banks may be allowed controlling stake in pvt banks — Chidambaram moots 10 pc acquisition a year Our Bureau
Mumbai , Oct. 29 THE Government is open to allowing acquisition of shares — up to 10 per cent a year — by foreign banks in domestic private banks and taking controlling stake in three-four years, the Union Finance Minister, Mr P. Chidambaram, said here on Friday. Stressing the need to encourage consolidation in the sector, Mr Chidambaram said, over a period of three or four years, foreign banks can acquire control of Indian private banks. He said size, efficiency and scale of operations are important for a bank. "The government will view in favour consolidation among public sector banks and acquisition of private banks by PSU banks." The Minister was speaking at the inauguration of the Dena Bank Corporate centre here on Friday. The Government also plans to reintroduce a Bill in Parliament allowing voting rights in accordance with the shareholdings, he said. At present, voting rights of foreign shareholders in local banks are capped at 10 per cent. "A large part of the banking space is currently occupied by public sector banks. The Government wants to provide a level-playing field for foreign and private banks. True competition will mean Government will not lean in favour of any one segment of banks. We will encourage foreign banks to come to India, expand and grow, also through mergers and acquisitions," Mr Chidambaram said. "The Government intends to encourage public sector banks to go to the market to raise resources. They should not look to the government for more equity," he added. Mr Chidambaram, however, reiterated that the government will continue to retain 51 per cent stake in public sector banks and that there may not be enough "head room" to sell further stakes in banks.
Open financial sector
Later speaking at the 10th anniversary celebration of the NSE, Mr Chidambaram said India should remove controls and restrictions and open its financial sector to competition from foreign players, including brokerage firms, mutual funds and insurance companies. "What we achieved in trade and industry can be replicated here. Not only would this deepen our financial markets but would help make India a financial powerhouse," he said. Commenting on the need for an efficient market, Mr Chidambaram said the market is a medium where a saver is converted to an investor.
More Stories on : Private Banks | Mergers & Acquisitions | Financial Policy | Foreign Banks
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