"The Nationalised Banks Act and Banking Regulation Act will be amended soon to bring down the government stake in public sector banks below 51 per cent," Devi Dayal, banking secretary in the Finance Ministry said today. The amendments are likely to come in the next session of Parliament, he said.

Addressing a bankers-borrowers meet organised by PHD Chambers of Commerce and Industry here, Dayal said by bringing down the stake below 51 per cent, government role in banks would be reduced in the future.

He said the government was also formulating a policy of voluntary retirement scheme (VRS) to bring down the staff costs in public sector banks.

Currently, other PSU companies have a policy on VRS and the policy currently being framed would be along similarlines, he said. "The cost of staff in public sector banks are very high. By having a comprehensive policy on VRS, the costs can be brought down significantly," Dayal said adding that this could help the banks to lend money at a lower rate of interest in future.

Stating that interest rates will also correct itself after banks reduce its cost of operations, Dayal said the government borrowings, which constituted about 60 per cent of total mop-up was also one of the main reason for higher lending rates. The interest rates will get corrected after inflation rate becomes steady, he said. To allow banks to recover bad-debts, government will amend the Sick Industries Companies Act (SICA) allowing banks to sell its assets to another company as a going concern, Dayal said.

The definition on sick companies would also be changed, he said adding that this would allow a company to qualify as sick if 50 per cent of networth was wiped out.

Under the current rules, a company would qualify as sick only after 100 percent of its networth was wiped out. Further, the government would also increase the number of debt recovery tribunals (DRT) from 10 to 15, while that of Appellate Authority for Industrial and Financial Restructuring (AAIFR) from one to five.

On the construction sector, Dayal said government would amend the laws to treat the sector as an industry. This would allow banks to finance the construction segment like any other industrial sector, he said. Dayal said the government would also amend the National Housing Bank (NHB) Act to allow banks to securitise housing loans. The proposal to amend the Act was also expected to be placed in the next session of Parliament, he said.