Govt panel may draft list of small public sector banks for privatisation

The government is likely to set up a panel of experts to prepare a list of Public Sector Banks (PSBs) that can be privatised, an Economic Times (ET) report said, quoting people aware of the developments. The centre is looking for ways to privatise PSBs as they have turned profitable and bigger, and fewer in number after several rounds of consolidation.

Previously, in April 2021, NITI Aayog had recommended the disinvestment of two state-run banks to the disinvestment department. Subsequently, the Central Bank of India and the Indian Overseas Bank were chosen for the purpose. However, no further steps were taken in this direction, the report said.

The ET report quoted a government official as saying, "A new committee may be set up to identify lenders for privatisation, which include mid- and small-sized banks, and determine the quantum of the stake sale based on their performance, including their bad loan portfolio among other parameters."

The panel is likely to have officials from the Department of Investment and Public Asset Management, the Reserve Bank of India, and the NITI Aayog.

Speaking on the matter, a govt official said that bank privatisation was part of a government strategy. However, now that all public sector banks have turned profitable, a reassessment of the situation is required.

The Nifty PSU Bank Index (an index that tracks the performance of PSU bank shares in the stock market) went up 65.4 per cent in the last year. Compared to this, Nifty50 (an index that tracks the broader Indian stock market) only grew 16 per cent.

The proposed privatisation plan is likely to focus on 12 smaller PSBs which may include the likes of Bank of Maharashtra and UCO Bank. Big PSBs like State Bank of India, Punjab National Bank, and Bank of Baroda are not being considered for privatisation, ET reported.