New Delhi: Following Moody's downgraded credit rating of State Bank of India, voices may become louder to reduce the Centre’s share in public sector banks. The experts are of the view that banks require a huge capital to maintain the statutory liquidity ratio which cannot be attained without reducing the government’s equity share.

According to the present law, the government must have 51 percent share in the public sector banks. In 2001, the then NDA government with Atal Bihari Vajpayee as its Prime Minister had prepared a Bill to reduce the Centre’s share in public sector banks to a minimum of 33 percent but due to political hassles, the Bill could not be introduced in the Parliament.

FICCI General Secretary and member of SBI, Board of Directors, Rajiv Kumar said, “Since the shortage of funds with the banks can worsen the already slowing economy, this is the right time to decrease the government’s share.”

However, according to banking expert Vaibhav Agrawal from eminent financial advising firm Angel Broking, “The banks in India are struggling to arrange funds in maintaining the statutory liquidity ratio which can further add to the woes of the slowing economy.”

According to Finance Ministry sources, the banks had held a meeting with Finance Minister Pranab Mukherjee in this regard. Currently, there are seven banks with more than 65 percent government’s stake while most of the banks in the country cannot obtain funds even on releasing shares.

In 2010-2011, the Union government had provided Rs 15,000 crore to Indian banks with help of the World Bank while Rs 6,000 crore has been provided this fiscal year which still falls short of the required amount.

The SBI needs Rs 37,400 crore to acquire 8 percent capital ratio but the government is ready to provide only about Rs 6,000 crore to Rs 8,000 crore. Moreover, Punjab National Bank, Oriental Bank of Commerce, IDBI and many others need extra capital to maintain their statutory liquidity ratio.

(JPN/Bureau)