The Indian government is reportedly weighing its options to amend laws to allow it to divest its stake in state-backed lenders.

If approved, the new laws will allow the government to reduce its stake in state-backed banks to 26% from 56%, Bloomberg reported citing sources.

Go deeper with GlobalData

Premium Insights

The gold standard of business intelligence.

Find out more

The amendments would also simplify the privatisation of certain identified banks and allow foreign investors to acquire larger stakes in others.

Notably, the government will continue to hold powers to make management appointments.

The move is part of India’s Prime Minister Narendra Modi’s plans to strengthen the country’s economic position.

It will impact policies enacted in 1969 when major commercial lenders in India underwent nationalisation.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

The amendments seek to reduce state-backed banks’ dependence on the government for capital injection while maintaining their quasi-sovereign status.

The talks are at an early stage and the details could change, the people said adding that before the proposals can be tabled in parliament, they must be studied and passed by the cabinet.

Separately, government-backed insurance giant LIC is planning to launch its initial public offering by March next year, which could value the insurer at $109bn.

Recently, India’s central bank amended the rules related to the ownership and corporate structure of private sector banks.

The Reserve Bank of India raised the limit of the stake promoters can sell in 15 years from 15% to 26%. Whereas individuals and non-financial groups can only own 10% in the banks.