Shares of state-run banks today rose as much as 5 per cent after an RBI panel report said that the Government should reduce the holdings in PSU lenders to below 50 per cent.

SBI scrip gained 1.59 per cent to Rs 2,312.45, while PNB rose 3.74 per cent per cent to Rs 830 on the BSE.

Shares of Canara Bank were trading 5.04 per cent higher, while IDBI Bank was quoting 2.20 per cent up and Oriental Bank of Commerce gained 1.14 per cent.

The Government should cut its holding in public sector banks to below 50 per cent, the Reserve Bank of India panel report had said yesterday, criticising the way in which the lenders are being governed.

Headed by ex-Chairman of Axis Bank PJ Nayak, the panel said that governance at the 26 public sector banks (PSBs) suffers due to several “externally imposed constraints” like dual regulation by the RBI and the Finance Ministry and external vigilance by agencies like the CVC and CAG, among others.

“If the Government stake in these banks were to reduce to less than 50 per cent, together with certain other executive measures, all these external constraints would disappear,” the report said.

It added: “This would be a beneficial trade-off for the government because it would continue to be the dominant shareholder and, without its control in banks diminishing, it would create the conditions for its banks to compete more successfully.”

(This article was published on May 14, 2014)
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