The government is looking to reduce its stake in State-run banks to 52 per cent to make them more professional and independent, Finance Minister Arun Jaitley said.

Speaking at the Indian Banks’ Association’s annual general meeting, Jaitley said public sector banks (PSBs) have to be protected from political decision-making and their decisions should be based only on banking merits.

At present, the government owns over 59 per cent stake in State Bank of India, the country’s largest public sector lender, 81.5 per cent in Central Bank of India, 76.5 per cent in IDBI Bank, about 64.5 per cent in Canara Bank, 64.4 per cent in Bank of India, 61 per cent in Andhra Bank, over 60 per cent each in Allahabad Bank and Punjab National Bank, and 57.5 per cent in Bank of Baroda.

Batting for independence “Public sector banks in particular have to be given a lot of independence and an arm’s length distance from political decision-making... Efforts are on to give shape to the Banking Bureau and to professionalise all personnel issues... We are willing to look at changes,” he said.

Successive governments have raised the issue of reducing ownership in PSBs in order to limit government interference and improve the quality of decision-making.

Jaitley said that Prime Minister Narendra Modi wants no bank to receive formal or informal directives from the government and had advised banks to operate essentially and exclusively on banking considerations.

He added that the government was also getting ready to unveil a draft bankruptcy code, which was a part of the Budget announcement, either at the end of this month or in early October.

State-owned lenders have struggled to recover much of the bad debt piling up on their balance sheets using available mechanisms because of the lack of a bankruptcy code.

In addition, the Finance Minister said that brick-and-mortar branches may probably lose relevance with alternative channels, such as online banking, coming up in a big way.

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