India shortlists four banks for potential privatisation

NEW DELHI/MUMBAI: The Union government has shortlisted four mid-sized state-run banks for privatisation, under a new push to sell state assets and shore up government revenues, according to three people familiar with the matter, Reuters reported.

The government has shortlisted four mid-sized state-run banks for privatisation, under a new push to sell state assets and shore up government revenues, three government officials said.

Privatisation of the banking sector, which is dominated by state-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk but the Centre aims to make a start with second-tier banks.

The four banks on the shortlist are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India, two officials told Reuters on condition of anonymity. Two of these will be selected for sale in the 2021/2022 financial year which begins in April, the officials said. The Centre is considering mid-sized to small banks for its first round of privatisation to test the waters. In the coming years, however, it could also look at some of the country’s bigger banks, the officials said.

The government will continue to hold a majority stake in the country’s largest lender State Bank of India, which is seen as a ‘strategic bank’ for implementing initiatives such as expanding rural credit.

A finance ministry spokesman declined to comment.

The economic contraction caused by the pandemic is driving the push for bolder reforms, economists say. New Delhi also wants to overhaul a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorise loans that soured during the pandemic as bad.