Banks: FM rules out lowering govt stake

Finance Minister P Chidambaram ruled out on Tuesday lowering government stake in Public Sector Banks to below 51 per cent and said there was no uncontrolled inflow of foreign capital into Indian banks.

"The previous NDA government had announced reducing government equity in Public Sector Banks to 33 per cent. When we came to power, I made it clear that it will not be reduced to below 51 per cent. That stands. We have no proposal to reduce government equity to below 51 per cent," he said replying to supplementaries in Rajya Sabha.

Prime Minister's Economic Advisory Council Chairman C Rangarajan had suggested that government may have to either bring in additional capital in Public Sector Banks or reduce its share to below 51 per cent to ensure rapid growth of PSU banks.

"There is no proposal under consideration to amend the statutory or other provisions for enabling government to bring down its shareholding in Public Sector Banks (other than associate banks of the State Bank of India where government has no shareholding) to below 51

per cent," Chidambaram said. RBI guidelines on Tier-I capital are being strictly followed by banks, he said.

"Our policy is that we will ensure adequate capital strictly in accordance with Basel-II norms."

On the surge in foreign capital inflow, he said "there is no uncontrolled inflow (of foreign funds) into the banking sector."

The RBI has laid strict guidelines including a cap on FII and individual investments at 20 and five per cent respectively, the minister said. "There is no rush of capital in the banking system," he said.