Privatisation process of two PSBs at advanced stage, says DFS Secy Malhotra

“Advance action” is underway for the privatisation of two public sector banks (PSBs) as announced by Finance Minister Nirmala Sitharaman in the last Union Budget, Financial Services Secretary Sanjay Malhotra said on Monday.

In the Union Budget for 2021-22, Sitharaman had announced privatisation of two PSBs besides IDBI Bank. However, this year’s Budget Speech had skipped the mention of the progress made for the privatisation of two PSBs.

“In so far as banking privatisation is concerned, there is a statement on the floor of the House by the finance minister for making enabling provision. Advance action on this is underway,” Malhotra said during the curtain raiser event for celebration of Azadi Ka Amrit Mahotsav.

Even as the NITI Aayog has suggested names of two PSBs for privatisation, the Centre is yet to make an enabling provision in the law for the divestment of the government’s stake sale below the 51 per cent threshold. The government had listed the introduction of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, in the Winter Session, but the Bill was not tabled. The Aayog had reportedly suggested privatisation of Central Bank of India and Indian Overseas Bank.

The approval to privatise the two PSBs is yet to be considered by the Core Group of Secretaries on Divestment (CGD) headed by cabinet secretary. Once approved by the CGD, the proposal will be sent to the Alternative Mechanism (AM) that comprises Sitharaman and Minister of Roads, Transport, and Highways Nitin Gadkari. After their nod, the Cabinet will take up the proposal.  

According to the amendments to the Banking Companies Act moved last year, the government is looking to retain at least 26 per cent stake in PSBs post privatisation.