FM rules out privatisation of PSU banks; Says political opinion is not in its favour

FM Arun Jaitley 

FINANCE Minister Arun Jaitley on February 24 virtually ruled out privatisation of public sector banks in the aftermath of Rs. 11,400 crore fraud hitting Punjab National Bank. He said such a move may not be politically acceptable.
Speaking at a business summit in New Delhi, the minister said a lot of people have started talking of privatisation in the aftermath of the PNB fraud.
"This (privatisation) involves a large political consensus. Also, that involves an...
amendment to the law (Banking Regulation Act). My impression is that Indian political opinion may not find favour with this idea itself. It's a very challenging decision," he said.
On February 23, FICCI president Rashesh Shah said that he met the finance minister and asked him to begin the process of bank privatisation in a phased manner, leaving just 2-3 lenders in the public sector.
The call for privatisation gathered currency after diamond jeweller Nirav Modi allegedly colluded with some officials of PNB to fraudulently obtain guarantees so as to avail of loans from Indian banks overseas.
Industry body Assocham has also urged the government to reduce its stake in public sector banks to less than 50% so that they can work with the sense of accountability and with the interest of stakeholders and depositors on priority.
Some industrialists too have supported bank privatisation. Adi Godrej of Godrej Group said the move would be good for the country as there are 'less or no' frauds at private banks. Bajaj Group head Rahul Bajaj too pitched for bank privatisation.
A number of state-owned bank stocks such as SBI and Bank of Baroda still keep their lustre intact with analysts even after the image of the entire PSU banking basket took a big knock from the PNB scam.
The nature of the Rs 11,400 crore PNB scam has diminished the confidence level in the bank in particular and PSU lenders in general.
According some data, 16 of 22 listed PSU banks reported losses in the third quarter as against 11 in the preceding one and 9 in the June quarter.
Data suggest that except for Vijaya Bank, Indian Bank and Syndicate Bank, the rest of all PSU banks had gross NPAs in excess of 10 per cent of the total advances by the end of the December quarter.