Privatisation of two public sector banks on meeting agenda next week

Four to five PSBs have been suggested by the Niti Aayog and they will be discussed in the meeting, sources said

The government may zero in on at least two public sector banks (PSBs) to be privatised in the first phase. Senior officials of the Niti Aayog, the Reserve Bank of India (RBI), and the finance ministry’s financial services and economic affairs departments are set to meet on April 14 (Wednesday) to discuss the potential candidates for privatisation, said two sources in the government.   
 

Four to five PSBs have been suggested by the Niti Aayog and they will be discussed in the meeting, the sources said, adding that the names could include Bank of Maharashtra and Indian Overseas Bank. Apart from banks, state-owned general insurance companies may also be taken up for discussion, said one of the two sources.

This will be the first meeting after the government kicked off the privatisation drive, with the think tank submitting last month its list of about 12 public sector undertakings (PSUs) to be privatised in the first phase.

The list will now be considered by the departments concerned of the finance ministry, and the final names will be sent to the Core Group of Secretaries on Divestment (CGD), headed by the cabinet secretary.

The Aayog is learnt to have prepared a report on PSBs based on their financials, debt and other issues, and accordingly short-listed them. The government may pump in some liquidity in those banks that are currently under the RBI’s prompt corrective action framework, and may consider them for either privatisation or merger once they are out of it.

Sources also said the government intended to keep four to five banks, depending on the regions and states, under its control and the rest would be privatised in a phased manner.

The think tank’s approach is in sync with the government’s new strategies on privatisation and asset monetisation. The process gained momentum after Prime Minister Narendra Modi’s recent pitch for privatisation, where he had stated that the government had no business to be in business and the mantra was going to “monetise and modernise”.

Sources said the Niti report would have a plan for majority/outright sale, strategic deals, monetising assets, or even share buybacks, along with the timelines. It is being prepared keeping in mind the disinvestment target for the upcoming fiscal year, which is pegged at Rs 1.75 trillion.

In her Budget speech, Finance Minister Nirmala Sitharaman had announced privatising two public sector banks and one general insurance company in 2021-22.

According to the new Public Sector Enterprise policy for Aatmanirbhar Bharat, the Aayog is mandated to recommend the names of PSUs in strategic sectors to be privatised, merged, or made subsidiaries of other PSUs.

Strategic sectors in which the government intends to keep a “bare minimum” presence include atomic energy, space, defence, transport, telecommunications, power, petroleum, coal, banking, insurance, and financial services.