The threshold of 10% shareholding cap for individuals in Public Sector Banks (PSBs) is being removed which means that Private Equity (PE) firms will now be able to pick up stakes in PSBs on the block for privatization. The Government proposes to make these changes through Banks Laws (Amendment) bill that seeks to bring changes to the Banks Companies (Acquisition and Transfer of Undertakings) Act and the Banking Regulation Act.
The proposal seeks to remove the 10% ceiling for individuals in the paid-up capital of State-owned banks and this will allow high netowrth individuals and PE firms to buy a larger stake, as notified by the regulator, in banks. Also, this will widen the pool of buyers eligible to bid for PSBs.
Further, with this the Reserve Bank of India, will be empowered to notify the fresh shareholding threshold from time to time. The changes to the legislation are seen aditing the privatization of two PSBs announced by the Finance Minister in the Union Budget 2021.