No decision on raising minimum public shareholding in companies to 35%
06 August 2019
The Budget proposal on raising the minimum public shareholding in companies to 35 per cent from 25 per cent was “not as a part of decision, but something on which we were keen to get a view”, finance minister Nirmala Sitharaman told reporters on Monday.
She said market regulator Securities and Exchange Board of India (Sebi) will be “initiating consultations before a position is taken”. This was mentioned in the Budget speech, she said.
Reports have suggested that if implemented, the rule could result in companies having to offer approximately Rs1,00,000 crore worth of shares currently owned by controlling shareholders to the public.
On the surcharge on the super-rich that has spooked foreign portfolio investors (FPIs), the minister said: “I am quite open to hearing out what they (FPIs) have to say.”
She said the series of meetings that have been lined up also include the ones with FPIs. Separately, new economic affairs secretary Atanu Chakraborty will also meet them. One of the proposals under consideration to give a one-time capital gains tax waiver for FPIs structured as trusts, to encourage their conversion to corporate structure the tax treatment of which hasn’t changed.
On the proposal for offshore sovereign bonds, the minister said details are yet to be worked out. “It is at the stage of announcement only. I am not speculating on the tranches, size, etc, as nothing has been decided yet,” she said.
As for the capital requirements of PSBs, finance secretary Rajiv Kumar said the ministry will decide after evaluating their June quarter results. Capital infusion into various banks will follow. The government has budgeted Rs70,000 crore for infusion into PSBs this fiscal, over and above Rs1,06,000 crore in FY19.
RBI deputy governor NS Vishwanathan, who participated in the meeting, said liquidity in the system remained adequate. As per the ministry statement, bank credit to NBFCs and housing finance companies (HFCs) has now risen by nearly Rs90,000 crore since September 2018. “In addition, pool buy-outs of over Rs40,000 crore by public sector banks have helped the NBFC and HFC sectors reduce their asset-liability mismatch,” according to the statement.
The finance secretary said norms will be finalised soon to enable PSBs implement the Budget announcement under which the government will offer a one-time six-month partial guarantee of Rs1,00,000 crore to PSBs for purchasing consolidated high-rated pooled assets of financially-sound NBFCs. This will cover their first loss of up to 10 per cent.