The future home of the world financial industry could be as big as the United States.
The Indian government is looking at a blueprint for how to convert the countrys biggest banks into publicly traded companies with the aim of enabling the country to emerge as a global financial powerhouse.
The countrys largest bank, ICICI Bank, has already signed up for a stake in a private company.
The new company would be known as Future Home.
The plan is to have the private company acquire 100% of the shares of the country’s biggest bank and then sell them for at least Rs 5,000 crore (US$3 billion).
The banks’ existing shares, worth Rs 5 lakh crore, will be sold in a public auction.
The government wants the private-owned Future Home to be able to take on debt of up to 30% of its total assets to be converted into public shares.
The private company would also be able sell up to a further 30% stake in the company.
The private-controlled Future Home would be able take on additional debt of as much as Rs 25,000-30,000 crores.
The government expects the private bank to have a net cash balance of Rs 30,000 billion (US $3.4 trillion).
In recent months, ICicI Bank has been embroiled in a number of controversies.
It had to pay back a loan to the government for which it had to repay Rs 1,200 crore to the RBI.
The bank is also facing the fallout from its sale of assets that it had purchased with borrowed funds.
The banks share prices have also plummeted as a result of the fallout.
This is a very ambitious plan and one that could see the future home banks’ shares be worth much more.
It would be a good opportunity for private-run companies to take their share of a countrys wealth, said Arvind Subramanian, a professor of finance at the University of Chicago and a member of the Advisory Board of the Future Home company.
Subramanian said private-based banks could be seen as a way to boost the growth of a small, medium-sized or even a large company.
“In a very short period of time, a company could become very profitable,” he said.
“It can take on a lot of debt.
This means that it is much easier to invest money in the future.
For the banks, there is a lot more money in future.
The market is a little bit skewed, but private companies are much more efficient.
In a private sector, the future money is the assets that you are trying to acquire, he said, adding that he expected private-managed companies to have better track records than public-owned ones.
The Future Home is currently in talks with the government on the details of the proposed takeover.
However, the government is also keen to acquire some private assets, including stakes in oil and gas firms, Subramani said.
A key question is how much would the private firm be able acquire.
The Future Home has said it would be willing to buy up to 50% of ICICi Bank.
(The Times of India)