Govt should Go Ahead with Disinvestment Of PSU Banks: SBI Report

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According to a research report by the State Bank of India (SBI) on Monday, the government should proceed with the disinvestment of public sector banks (PSBs) as they are currently in good condition. The report also suggests consolidating existing government-owned banks. Click here to download SBI Research Report PDF

The report, titled ‘Prelude to Union Budget 2024-25,’ emphasizes the need for the government to take a stance on the disinvestment of PSBs, given their favorable condition. It also highlights the ongoing privatization of IDBI Bank, with the government and the Life Insurance Corporation of India selling nearly 61% of the lender’s stake. Click here to download SBI Research Report PDF.

The report further recommends adjustments to the tax on deposit interest, advocating for a flat tax treatment across the maturity ladder, aligning it with mutual funds and equity markets. By making deposit rates more attractive, the report suggests that household financial savings and CASA (Current Account and Savings Account) could increase, leading to additional spending and greater GST revenue for the government. Click here to download SBI Research Report PDF

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Additionally, the SBI report raises concerns about the Insolvency and Bankruptcy Code (IBC), urging the government to address the issues faced by the code and expedite the resolution of cases. The report reveals that recoveries through the IBC in FY24 were only 32%, and financial creditors suffered losses of 68% of their claims. It also states that the time taken to reach a resolution is significantly longer than the stipulated 330 days, standing at 863 days.

To foster a vibrant secondary market for stressed assets, the report suggests widening the pool of prospective resolution applicants. It highlights the introduction of Special Situation Funds (SSFs) by the Securities and Exchange Board of India (SEBI) as a promising start and calls for policymakers to make the regulatory regime on SSFs more attractive to investors.

It’s important to note that the opinions expressed in the report are those of the research team and may not necessarily reflect the views of the bank or its subsidiaries.

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In a separate budget recommendation, Akshat Khetan, founder of AU Corporate and Legal Advisory Services, advocates for increased budget allocations to promote mediation, arbitration, and other Alternative Dispute Resolution (ADR) methods. This move aims to alleviate the burden on traditional courts.

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2 COMMENTS

  1. SBI should concentrate on staff behaviour and reasons one of them may be staff shortage, one should clean our own house, PSU should be given more business by govt depts diverting from sbi, though staff shortage productivity per employee is increasing,

  2. Consolidation of PSBs is the need of the hour in order to compete with international banks with larger capital.

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