Budget 2019: SEBI Asked to Look at Hiking Companies' Minumum Public Shareholding
This proposal, raising minimum public shareholding level in listed companies to 35 per cent, is aimed at increasing liquidity in the stock markets.
The Securities and Exchange Board of India (Sebi).
New Delhi: The government has asked market regulator SEBI to look at raising the minimum public shareholding level in listed companies to 35 per cent from the current 25 per cent, Finance Minister Nirmala Sitharaman said on Friday.
Presenting the Union Budget 2019-20 in Parliament, Sitharaman said, "We have asked SEBI (Securities and Exchange Board of India) to examinine raising the minimum public shareholding to 35 per cent from the current 25 per cent." Once tasked, SEBI will have to give a time frame for this to the companies.
This proposal is aimed at increasing liquidity in the stock markets and reduce share price manipulation. While the Indian market has largely been promoter-driven, a mandatory increase in public shareholding will help deepening of the bourses.
At the same time, such a move will help in tighter corporate governance, which has been slipping as evident from many recent cases. With disclosures being mandatory, such a move will also help protect investors and improve the corporate governance.
Moreover, increase in the minimum public shareholding will bring in more liquidity and close off the avenues for price manipulation.
On the other hand, such a move will affect public sector banks (PSBs) in many of which the government shareholding is even higher than SEBI's current limit of 75 per cent. Repeated recapitalisation of PSBs in recent times has pushed up the government stake in state-run banks.
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