Forget privatisation, govt has hugged its banks tighter
- The government through its recapitalisation plan has increased its stake in PSU banks
- Part of the capital infusion in FY18 was done through recapitalisation bonds
A stitch in time saves nine. The government has, over the years, received advice from numerous quarters to reduce its stake in public sector banks (PSU banks) to below 51%, so that these lenders have sufficient capital for growth. While the government has rejected this line of thought, it had itself talked of reducing its stake from existing levels to around 52% by allowing banks to raise equity capital from other sources. But things have gone in the opposite direction, as the chart below shows, with the government’s stake rising above 95% in one case.
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