Government Plans Privatisation of Two Public Sector Banks

Nirmala Sitharaman, the Finance Minister (FM) presented the Union Budget 2021 on 1st February. FM during the budget meeting mentioned about the government’s plan to privatise two public sector banks. Apart from the two banks, Centre also plans to divest stake in a general insurance company.

Nevertheless, FM did not mention the specific banks Centre is considering to sell stake in or how much the government would divest. The government plans to bring in the required legislative changes in the parliamentary session for enabling this divestment plan.

Centre anticipates collecting Rs 1 lakh crore via disinvestment in financial institutions and public sector banks in FY 2022, which was previously Rs 32,000 crore for 2020-21. The government has undertaken this step for bringing in public sector banking reforms. A recapitalisation plan worth Rs 20,000 crore also has been announced by the government concerning state-run banks.

In August 2019, Centre had announced the merger of 10 public sector banks into four, effective 1 April 2020. Punjab National Bank acquired United Bank of India and Oriental Bank of Commerce; Union Bank of India acquired Corporation Bank and Andhra Bank; Syndicate Bank merged with Canara Bank, while the Allahabad Bank merged with the Indian Bank.

Financial experts believe that the Centre is unlikely to involve the mega PSU banks, which evolved due to mergers. Only the standalone banks left after the merger exercise could likely be the privatisation candidates. Bank of India, Bank of Maharashtra, and Indian Overseas Bank have been anticipated to be on the list for a long time.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in