Chidambaram rules out PSU banks’ privatisation
Finance minister P Chidambaram on Wednesday ruled out the possibilities of privatising public sector banks.
By TNN |
DELHI: Finance minister P Chidambaram on Wednesday ruled out the possibilities of privatising public sector banks (PSBs).The move is primarily aimed at consoling the Left allies of the UPA government, who have already aired their opposition to the privatisation of PSBs.
Earlier this month, the FM had said the government would take decisions on mergers and acquisitions of PSBs after examining various suggestions from the banks. Today’s announcement comes in as a major reversal of the earlier stance of allowing board driven mergers. “We will never privatise public sector banks,” explained Mr Chidambaram, after inaugurating 201 inter-connected ATMs of Bank of Baroda. Political analysts point out that this statement is expected to cool down the left parties.
Mr Chidambaram further clarified that the ministry of finance (MoF) is willing to give more autonomy to PSBs to function in a better manner. But the banks are not coming with their charter of demands for autonomy. “We are willing to give banks more autonomy. But autonomy will come with accountability. It’s for the banks to come out with bill of demands on autonomy,” Mr Chidambaram explained.
However, the government has reserved its rights under four broad areas. These are with regard to the reduction in government stake in PSBs below 51%, corporate governance, appointment of chairman and executive directors, and adhering to the MoU that each bank has to sign with the government.
Banks have been given more freedom on various areas of human resource management and business expansion. The introduction of performance-based incentives is currently at a discussion stage with Indian Banks Association (IBA). He, however, said that convergence and consolidation would get a push in the banking sector. “We want efficient, large and world-scale banks.
We need banks that would finance our world trade and the growth of the GDP,” Mr Chidambaram explained. Giving the thrust areas for banks, the finance minister said banks have to finance small-scale industries (SSI), micro-finance and students to take India through the needed growth trajectory. “Banks must grow scales and size,” he added.
Earlier this month, the FM had said the government would take decisions on mergers and acquisitions of PSBs after examining various suggestions from the banks. Today’s announcement comes in as a major reversal of the earlier stance of allowing board driven mergers. “We will never privatise public sector banks,” explained Mr Chidambaram, after inaugurating 201 inter-connected ATMs of Bank of Baroda. Political analysts point out that this statement is expected to cool down the left parties.
Mr Chidambaram further clarified that the ministry of finance (MoF) is willing to give more autonomy to PSBs to function in a better manner. But the banks are not coming with their charter of demands for autonomy. “We are willing to give banks more autonomy. But autonomy will come with accountability. It’s for the banks to come out with bill of demands on autonomy,” Mr Chidambaram explained.
However, the government has reserved its rights under four broad areas. These are with regard to the reduction in government stake in PSBs below 51%, corporate governance, appointment of chairman and executive directors, and adhering to the MoU that each bank has to sign with the government.
Banks have been given more freedom on various areas of human resource management and business expansion. The introduction of performance-based incentives is currently at a discussion stage with Indian Banks Association (IBA). He, however, said that convergence and consolidation would get a push in the banking sector. “We want efficient, large and world-scale banks.
We need banks that would finance our world trade and the growth of the GDP,” Mr Chidambaram explained. Giving the thrust areas for banks, the finance minister said banks have to finance small-scale industries (SSI), micro-finance and students to take India through the needed growth trajectory. “Banks must grow scales and size,” he added.
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