People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 35

August 29, 2004

    Do Not Raise FII Limit In PSB’s: AIRBEA


THE All India Reserve Bank Employees Association (AIRBEA) has urged the government not to accept the recommendation of doubling the foreign institutional investment allowed in public sector banks from the present 20 per cent to 40 per cent. This recommendation was made recently by a government committee headed by chief economic adviser, Ashok Lahiri, as reported by some national dailies.


In a statement on August 16 from Kolkata, the AIRBEA general secretary Samir Ghosh felt “any further relaxation is inappropriate and unwarranted – rather the current investment limit itself should be reduced, better still if the foreign investment is totally stopped”. The PSBs have no problem regarding capitalisation and almost all of them have sound capital adequacy ratio as per norms decided by Reserve Bank of India. The performance of PSBs has been excellent in past few years. They have been consistently raising their profit – both operative and net – and fared very well in respect of all the parameters of efficiency/profitability comparable to international standard, stated Ghosh. He pointed out that this view is shared both by the RBI as well as esteemed international journals on bank.


Explaining why the association is opposed to this raising of the cap, Ghosh stated that the FII investment is very much volatile and prone to sudden flight on any pretext. Therefore any invitation or overtures to them for investment in PSBs is fraught with serious risk for the security and soundness of public sector banking. In this given perspective and considering its wider ramification for the economy as a whole, Ghosh urged on the government and RBI to reject any such proposal for raising FII limit in PSBs. (INN)