Terming the sale of government stake in public sector banks as "stake of the people of India", union Minister of State for Finance Jayant Sinha Saturday said the deals will be made at "appropriate valuation".
"It is our responsibility to ensure that if we're going to dilute our stake, which is the stake of the people of India, we'll do it at an appropriate valuation. We're certainly not going to do it at a valuation that will result in too much dilution for the people of India," the minister said on the sidelines of the two-day bankers' conclave at the NIBM.
The union cabinet had recently said it will reduce the government's stake in 27 public sector banks from the current 56 percent to 52 percent.
However, in the Financial Stability Report released recently by the Reserve Bank, concerns were raised over the lower share prices of the state-run banks. "Capital raising efforts by PSBs other than the capital infusion by the government, face challenges because of their relatively low equity valuations compared to their private sector peers," the report said.
The need for dilution has arisen as a result of the higher capital required for meeting the stringent global regulatory standard of Basel-III norms on banks for capital adequacy, stress testing and market liquidity risk by April 2019.
The centre has Rs 11,200 crore capital infusion budget for the current fiscal and speculation is on if the government will exceed this given the needs of the banks.
"We're absolutely vigilant on that matter. We completely understand how markets operate, how valuations are set and we'll take all of that into account when we take decisions, when we dilute our stake," Sinha said.
According to the minister, as the economy is expected to pick up pace in the coming months it will result in the banking sector picking up momentum.
-- Indo-Asian News Service
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