Summary

The central government is considering halving the minimum stake in public sector banks in the wake of the ongoing strike against privatization. The law could be amended to reduce the central minimum shareholding in public sector banks from 51 per cent to 26 per cent. The government retains the right of appointment in the management of the bank after the reduction of the stake.

Bank employees protested
– Photo: Amar Ujala

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Amid the ongoing strike against privatization, the government plans to halve its minimum stake in public sector banks. The law could be amended to reduce the central minimum shareholding in public sector banks from 51 per cent to 26 per cent. The government retains the right of appointment in the management of the bank after the reduction of the stake.

The path to privatization will be easier, without parliamentary approval, even foreign investors will be able to buy more shares
The Bloomberg government continues to propose changes to the Banking Regulation Act. Under this, it will reduce its stake in banks from 51 per cent to 26 per cent. If these proposals are approved, the path of privatization of public sector banks will be facilitated. Also, it allows foreign investors to buy a larger and larger stake in these banks without seeking parliamentary approval.

By law, however, there is a stipulation that the government retain the right of appointment in management. The talks are at an early stage and will be discussed by the Union Cabinet before it is tabled in Parliament. The purpose of this change is to reduce the burden of increasing NPAs on banks and to increase the inflow of capital into the economy.

The Reserve Bank is set to implement the new rule from the new year, which will prevent e-commerce companies, food delivery companies and lenders from collecting customer card details.

The tokenize rule, which applies from January 1, prohibits the keeping of customers’ card details
After this rule goes into effect on January 1, 2022, e-commerce companies such as Amazon, Flipkart, and food delivery companies such as Zomoto-Swiggy will no longer be able to save their customers’ debit-credit card details. It also has an impact on the business of fintech lending on digital platforms.

Industry sources say the new RBI regulation will have an impact on digital transactions. In March 2020, the Reserve Bank ordered sellers and digital lending companies not to collect customer card details. Its purpose is to promote card security. In September 2021, the RBI again issued guidelines and directed that the regulations be implemented from January 2022. Sijo Kuruvilla, Associate Body Head, Digital India Foundation, said the move could reduce the revenue of companies doing business online by 20-40 per cent. The impact will be felt by smaller companies, with consumers also turning to cash transactions.

On Friday, the RBI board headed by Governor Shaktikanta Das discussed the central bank’s digital currency (CBDC) and private cryptocurrencies. The RBI said that after the 592nd meeting of the board in Lucknow, the meeting brainstormed on a phased implementation strategy using the CBDC.

Apart from this, the risks and restrictions of private cryptocurrencies are also discussed. Governor Das has always expressed his opposition to cryptocurrencies and has warned many times about its risks to the economy and its impact on investors. The RBI has recently sent a proposal to the Government to enact legislation to increase the coverage of notes by amending the Reserve Bank of India Act 1934. Through this the digital currency has to be approved.

Token policy applies
The Reserve Bank has asked companies doing business online and fintech lenders to implement a token system or special code. With this help, customers will be able to shop online without any card details.

However, the customer is required to enter his card details every time he makes a purchase. Manas Mishra, chief product officer of payments company PayU, said not all companies were ready to implement the rule and that it would take another nine months. The token system allows customers to avoid having to fill in the card details repeatedly, which promotes cash usage.

Range

Amid the ongoing strike against privatization, the government plans to halve its minimum stake in public sector banks. The law could be amended to reduce the central minimum shareholding in public sector banks from 51 per cent to 26 per cent. The government retains the right of appointment in the management of the bank after the reduction of the stake.

The path to privatization will be easier, without parliamentary approval, even foreign investors will be able to buy more shares

The Bloomberg government continues to propose changes to the Banking Regulation Act. Under this, it will reduce its stake in banks from 51 per cent to 26 per cent. If these proposals are approved, the path of privatization of public sector banks will be facilitated. Also, it will allow foreign investors to buy more and more shares in these banks without the approval of Parliament.

By law, however, there is a stipulation that the government retain the right of appointment in management. The talks are at an early stage and will be discussed by the Union Cabinet before it is tabled in Parliament. The purpose of this change is to reduce the burden of increasing NPAs on banks and to increase the inflow of capital into the economy.

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