RBI suggested the government to cut stake to 51% in top PSBs in 12-18 months

RBI suggested the government to cut stake to 51% in top PSBs in 12-18 months

The Reserve Bank of India has suggested the government to cut down its stake to 51% in leading public sector banks in the next 12-18 months.

What are PSBs?

• Public sector banks (PSBs) known as government banks/ government-organized bank are those whose most of the stake varying between 51-100% are under government’s control.

What has happened?

• The main regulatory body of these banks are government bodies but now due to economic condition of our country RBI has suggested to reduce the government stake from the banks and use that capital in other sectors which requires development. It will be a much-required push to government’s disinvestment efforts. The decision is not yet finalized, though some of the officials have shown a positive reaction to this suggestion.

Which banks are shortlisted for this?

This has to take place in 6 banks namely:

• State Bank of India,
• Punjab National Bank,
• Bank of India,
• Bank of Baroda,
• Canara Bank, and
• Union Bank of India.

The stake will be reduced to the minimum percentage i.e. 51% to fulfil the criteria and to be retained as public sector banks only and the rest of the stake will be withdrawn for other sectors.

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Government’s present stake in these banks:

 How much amount could be generated?

The estimates suggest that 43,000 crores will be generated after the sale of the stake from these banks. If the decision gets finalized the process will start and it will possibly take 12-18 months for this conversation.

Conclusion:

Also, RBI has suggested to bring down the stakes to 26% but it will require more time also it will lead to privatization which needs detailed planning and a backup to avoid the future crisis in these banks. Thus, there are chances that privatization of other banks to use the stake in other sectors if this happens the whole regulatory system goes to other authority which might bring new changes in the conduction and regulation of the system and this can require more time. Thus, we can say that privatization of most of the banks can take place in the near future to support the economy.

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