Kotak moots legislation to reform public sector banking

Uday Kotak proposed changes to public sector banking after abrogation of Article 370. Reuters File Photo

After the abrogation of Article 370, banker Uday Kotak on Monday called upon the government to bring in more legislative changes to lower state ownership in public sector banks below 50% and also re-introduction of the FRDI Bill.

He proposed changes to public sector banking, including reducing the number of state-run lenders to five, getting government stakes down in some of them to under-50%, or merging a few of them or even public-private partnerships in banking.

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Under the public-private partnership model, the state ownership has to be capped at 26 or 33%, with the private sector partner owning the rest, he said, adding this will create huge value for the government. “We must think about a courageous move of looking at state-owned banks. It would be differentiated, bold and would be a big step in the transformation of finance,” he said, delivering the 25th Lalit Doshi memorial lecture this evening.

The banker also suggested re-introduction of the controversial Financial Resolution and Deposit Insurance (FRDI) Bill to tackle the woes plaguing the financial sector.

“Time has come for a strong FRDI Bill along with a strong resolution mechanism for handling stress and mortality in the financial sector,” he said, speaking of the Bill which was withdrawn because of a ‘bail-in’ clause.

Kotak also pitched for a stronger Financial Sector Development Council

“Time has come for a very strong FSDC under the finance minister that ensures that issues of regulation between regulators are handled in a seamless manner,” he said.

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