Speaking at the Ficci seminar, Kelkar said "The finance minister had indicated in the budget that a second phase of reforms will be announced soon. The (finance) ministry plans to bring out a paper on this... One of the likeliest issues that will be included in it is privatisation of public sector banks." The paper will also look into other areas of support to the vital activities of the banking sector.

Senior bankers at the Indian Banks' Association had made a strong pitch for recast of equity base to be able to access the capital market before the finance secretary on Wednesday. They also urged Kelkar to allow banks access the overseas market to raise capital.

The government move to accept the Naraismham panel recommendation on paring itsstake is significant as some of the public sector banks are required to shore up their capital base to be able to expand their assets. These banks have been lobbying hard for a dilution in the government stake.

The paring of the Government's stake will also pave the path for restructuring the bank boards and effectively making the all-powerful banking division ineffective.

Since the amendment to the Banking Regulation Act in early '90s which brought down the Government stake in public sector banks to 51 per cent, a string of banks accessed the capital market while others have been waiting in the wings. The list of nationalised banks which have entered the market includes Oriental Commercial Bank, Bank of Baroda, Bank of India, Corporation Bank and Dena bank.

`RIBs not too successful'

Finance secretary admitted that the Resurgent India Bonds (RIBs) floated by State Bank of India, to finance infrastructure projects in the country, has not served its purpose as the five-year tenure of theinstrument is too short a period to support infrastructure. He said that a large amount of RIBs has gone into investment in government securities and other statutory liquidity ratio (SLR) instruments.