INSUBCONTINENT EXCLUSIVE:
PM Modi is seeking to reduce state-run banks reliance on frequent injections of government capital.New Delhi: The government is considering
changes that would make it easier to lower its stake in state-run banks, a key step in Prime Minister Narendra Modi's plan to unclog credit
flow to the economy.The proposals -- if approved -- would allow the government to gradually lower its holding in state-run lenders to 26%
from 51% without diluting its grip on management appointments, the people said, asking not to be identified as the deliberations are
private.They would also simplify privatization of certain identified lenders and permit foreign investors to purchase bigger stakes in
others without seeking parliament approval.With the proposed amendments, PM Modi is seeking to reduce state-run banks' reliance on frequent
injections of government capital while still maintaining their quasi-sovereign status that depositors favor.The move would dilute some of
the policies India enacted in 1969 when the country swept in to nationalise its lenders, creating a swathe of banks that even today control
two-thirds of the sector's assets and the bulk of its bad debts.Key Proposals:* Insert an enabling provision to speed up the process toward
parliament approval for privatizations after details have been agreed with the Reserve Bank of India (RBI).* Government stake reduced to
minimum 26% from 51%; regulation wouldn't move to the Companies Act that governs private sector lenders.* Foreign stakeholdings can be
allowed to breach the 20% cap.* Single shareholder's voting rights will no longer be capped at 10%.Early talks are still on and the details
could change, the people said
The proposals would need to be studied and cleared by the cabinet before being placed before parliament, they added.A spokesperson for the
Finance Ministry couldn't be reached for comment.Bank privatizations can be fraught affairs in India, where unions still hold sway, albeit
not as powerfully as they did decades ago.Thousand of employees belonging to state-run lenders continued their strike for a second day on
Friday, protesting against the proposed privatization of banks by the government, the Press Trust of India reported.However, PM Modi is
fresh off the success of the privatization of Air India Ltd., the nation's flag carrier, and is heading toward listing state insurer LIC,
which is being compared with the Saudi Aramco IPO in its ambition, scope and scale.The government could be betting that investor appetite
for state-run banks will improve once a recently set up bad bank buys the worst of the soured assets on lenders' books.The sector's bad-loan
ratio is forecast to rise to 9.8% by March 2022 from 7.48% a year ago, hampering the disbursal of fresh loans to businesses.
