Cutting govt stake in PSBs to 52% not enough: RBI


  • The Reserve Bank of India has stated that reducing government stake to 52% in public sector banks will not be enough to raise the Rs 2.34 lakh crore of equity capital needed to meet Basel III prescriptions. 
  • PSU banks should look at financial inclusion, which includes schemes such as Jan Dhan Yojana, as a profitable business proposition and not as a matter of compliance with the RBI and government requirements.
  • In March last year, the RBI had extended the deadline for meeting Basel III prescriptions by a year to March 2019 after it became clear that stress on asset quality would impact profitability of banks. 
  • PSU banks would require approximately Rs 4.5 lakh crore as tier I capital, of which Rs 2.4 lakh crore is the amount that would have to be infused in the form of equity capital.
  • The RBI official's comments come a week after the Prime Minister held a summit of public sector bank chiefs to get them to brainstorm on the road ahead. 
  • One of the solutions for various issues faced by the state-owned banks has been the creation of a holding company.
  • The central bank deputy governor the proposal to have a holding company for public sector banks should not be from the limited perspective of separating the public sector banks from the RBI and should have three-fold goals - reducing dependence on the government for capital, improving corporate governance and reducing risks to financial stability.
  • According to Gandhi, the high level of bad loans and low capital adequacy gives an indication of the tight spot that PSU banks are in today.