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Govt stake in PSBs not to fall below 51 pc

R.V. Moorthy
`NO ORDERS, ONLY POLICY DIRECTION': The Finance Minister, Mr P.Chidambaram, at the Parliament House in New Delhi on Tuesday. - R.V. Moorthy

New Delhi , Aug 22

The Finance Minister, Mr P. Chidambaram, said on Tuesday that the Government was justified in asking public sector banks to seek board approval before increasing lending rates in response to the Reserve Bank of India's rate hikes.

He also said that the Government would not force consolidation on public sector banks.

While pointing out that the Government is the owner of these banks, the Finance Minister said that the boards were accountable to it and that it had the right to tell the banks how they should take a decision.

"The boards of the banks should know the views of the government nominee, the central bank nominee and also independent directors' views," he told the Lok Sabha.

The Finance Minister also said that the Government would not make rate decisions on behalf of the banks. "I am not micro-managing the issue of interest rates, but only indicating the manner in which the decision ought to be taken. The owner guides the process of decision-making, and the process of decision-making has to be board-driven," Mr Chidambaram said.

Regarding the public sector character of the Government-owned banks, Mr Chidambaram said that these banks would remain in the public sector and that the Government would not reduce its stake to below 51 per cent.

"We do not support the earlier government view that government equity in State-run banks should be brought down to 33 per cent," Mr Chidambaram said.

On consolidation, the Finance Minister said that the consolidation move should come voluntarily from the banks and employees and that the Government would not force the banks to merge with each other.

More Stories on : Financial Policy | Interest Rates | Public Sector Banks

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