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GoM may consider privatisation of IOB, Central Bank this year
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SME Times News Bureau | 28 Jun, 2021
Inching closer to privatisation of two public sector
banks, a high-level panel of secretaries headed by Cabinet secretary is
believed to have zeroed in on Central Bank and Indian Overseas Bank as
possible candidates for sell off this year.
Sources said that the
high level panel of secretaries met in the middle of last week to
thrash out the regulatory and administrative issues concerning the PSU
bank privatisation and have identified banks that would be put up
disinvestment. The panel will now send the names of the shortlisted PSU
banks to the group of ministers on disinvestment or Alternative
Mechanism (AM) for approval.
Earlier, NITI Aayog has submitted
the names of a few public sector banks (PSB) and one public sector
general insurer which can be sold off under the government's new
privatisation policy to the Core Group of Secretaries on Disinvestment.
People
in the know also said that Indian Overseas Bank (IOB) and Central Bank
are the top two candidates that have been favoured for privatisation,
though Bank of Maharashtra has also found favour for the exercise either
this year or possibly later.
Further, according to sources,
United India Insurance may be suggested to the ministers panel for
privatisation among the three general insurers, given its relative
better solvency ratio. However, financial sector experts also contend
that Oriental Insurance, with the least solvency ratio among the three,
may be favoured as it does not have overseas operations and inviting a
private investor may be easier for it.
Government had earlier
indicated that banks under prompt corrective action (PCA) framework or
weaker banks would be kept out of privatisation as it would be difficult
to find buyers for them. This would have left three PSBs - Indian
Overseas Bank, Central Bank and UCO Bank out of the government's
disinvestment plan. But they could be bought out of PCA as there are
visible signs of improvement in some of the key parameters such as
profitability and asset quality (in net NPA terms as they have stepped
up provisioning) in the last 3-4 quarters. This could allow them to be
considered for privatisation.
In this year's budget, Finance
Minister Nirmala Sitharaman announced that two state-run banks along
with IDBI Bank would be privatised in FY22. She also said that one
general insurance company would be sold off in the current fiscal.
Going
ahead with the privatisation process of IDBI Bank on May 5, the Cabinet
Committee on Economic Affairs (CCEA) gave its in-principle approval for
strategic disinvestment along with transfer of management control in
the PSB.
The extent of respective shareholding to be divested by
the GoI and LIC, shall be decided at the time of structuring of
transaction in consultation with the RBI.
The Finance Minister
while delivering the budget speech on February 1 announced a capital
infusion of Rs 20,000 crore in state-owned banks for the financial year
2021-2022.
Prior to the privatisation process, the government
also undertook merger of the state-run banks, amalgamating weaker banks
with the stronger and larger ones. A total of 10 public sector banks
were merged with effect from April 1, 2020.
With the merger coming into effect, India currently has 12 public sector banks, down from 27 in 2017.
The
government has budgeted Rs 1.75 lakh crore from stake sale in public
sector companies and financial institutions. The target, however, may
turn out to be ambitious given the global and domestic economic scenario
amid the second wave of Covid-19.
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