Shares of state-run banks today rose by as much as 5 per cent after an RBI panel report said the government should reduce holdings in PSU lenders to under 50 per cent.
Shares of Canara Bank were trading 5.04 per cent higher, while IDBI Bank was quoting 2.20 per cent up and Oriental Bank of Commerce gained 1.14 per cent.
The government should cut its holding in public sector banks to under 50 per cent, said the report by a Reserve Bank of India panel yesterday, criticising the way in which the lenders are being governed.
Headed by ex-chairman of Axis Bank PJ Nayak, the panel said that governance at the 26 Public Sector Banks (PSBs) suffers due to several "externally imposed constraints" like dual regulation by the RBI and finance ministry and external vigilance by agencies like the CVC and CAG, among others.
"If the government stake in these banks were to reduce to less than 50 per cent, together with certain other executive measures, all these external constraints would disappear," the report said.
It added: "This would be a beneficial trade-off for the government because it would continue to be the dominant shareholder and, without its control in banks diminishing, it would create the conditions for its banks to compete more successfully."