The Union government is likely to bring amendments in Banking Regulations Act and Banking Law Act during monsoon session to privatise the two-state run banks. NITI Ayog has shortlisted Central Bank of India and Indian Overseas Bank for divestment, according to CNBC Awaaz.
In the Union Budget 2021, finance minister Nirmala Sitharaman announced the decision of privatising of two public sector banks (PSBs) in 2021-22. According to the new Public Sector Enterprise policy for ‘Aatmanirbhar Bharat’, NITI Ayog has been entrusted with the task to suggest names of PSUs in strategic sectors to be merged, privatised, or made subsidiaries of other PSUs. The government think-tank has recently submitted a report to the core group of secretaries on disinvestment mentioning the names of these two banks the would be privatised this fiscal. The other members of the core group panel are economic affairs secretary, revenue secretary, expenditure secretary, corporate affairs secretary, secretary legal affairs, secretary department of public enterprises, secretary department of investment and public asset management (DIPAM) and the secretary of administrative department. Once the the core group of secretaries, headed by the Cabinet Secretary, clear the names, the report will go to alternative mechanism (AM) for its approval and eventually to the Cabinet headed by the Prime Minister for the final nod.
Finance minister had recently said “interests of workers of banks which are likely to be privatised will absolutely be protected whether their salaries or scale or pension all will be taken care of". Explaining the rationale behind the privatisation, Sitharaman had said that banks in the country needed to be bigger, just like the State Bank of India (SBI).
“We need banks which are going to be able to scale up… We want banks that are going to be able to meet the aspirational needs of this country," Sitharaman had said. A lot of thought had gone behind the intention to privatise some public sector banks, she further added.
The two lenders are likely to come out with an attractive voluntary retirement scheme (VRS) soon, according to news agency PTI. “An attractive VRS will make them lean and fit for takeover by the private sector entities that are keen to enter the banking space," the sources told PTI.
The government also plans to exit LIC-controlled IDBI Bank. Last month, the Union Cabinet gave in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank. The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently the promoter of IDBI Bank with management control, has a 49.21 per cent stake.
(With inputs from agencies)