Centre should lower stake in banks to 33 per cent, says CII

New Delhi: The Centre should bring down its stake in state owned banks to 33 per cent over the next 2-3 years as it plans to recapitalise banks to strengthen NPA-hit lenders, said industry chamber CII on Sunday.

“It could retain a larger share in the State Bank of India in order to meet priority needs. The off-loading of stake may be in the form of preference shares instead of equity shares, to maintain the majority voting rights with the government with nil transference to the investors,” said the chamber.

It said that on a more immediate basis the government may consider going for public issue to dilute their stake to 52 per cent with the 33 per cent being a target over the next three years.

CII said that the government could look at creating a safe scaffolding by distancing itself from management of public sector banks (PSBs) through the creation of a Bank Holding Company which could assume the entire government stake in all PSBs. “Such a holding company would be empowered to raise resources from various sources and issue bonds, and would also monitor the performance of the PSBs,” it said.

The chamber pointed out that infrastructure sector is a major source of bad assets for PSBs, resulting from a mismatch between the relatively short-term nature of bank assets and the long-term tenure of infrastructure loans. “CII’s suggestion is that banks could consider looking at re-financing their infrastructure portfolio through ‘infrastructure debt funds’ thereby creating investment vehicles where institutional investors such as insurance and pension funds can invest and refinance existing debt of infrastructure companies,” it said.

CII suggested that banks could consider securitisation of their good and performing loan portfolios and monetise the debt to raise funds to capitalise their books.