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Challenges of Disinvestment in Public Sector Banks in India
Abstract
Both Disinvestment and Privatization process in Public Sector Banks initiated by the then NDA Government came to an end soon after UPA Government took over. The Atal Bihari Vajpayee government had proposed to reduce government holding in state-run banks to 33% but the amendment could not be passed in Parliament as Congress, which was the main Opposition party, blocked the move. Later on Congress party with other partners came to power and even The Ministry of Disinvestment was closed .The recommendations of Disinvestment Commission could not be implemented. For last one decade disinvestment process came to a grinding halt, however, now again there are possibilities that Public Sector Banks may initiate the process again. Privatization process may seem to be a remote possibility at present, however, Disinvestment is on agenda of present government. The Government is now set to reduce shareholding to less than 52% while maintaining ownership but selling additional shares which will infuse more capital to fulfil capital adequacy norms as per Basel III. There are a number of challenges to this process and it is necessary to expedite the process. It is assumed that disinvestment process will make public sector banks more accountable and also efficiency may improve, ultimately pave way for privatization in near future.
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