BoI, Central Bank, IOB being considered for privatisation
THE GOVT THINKING IS THAT THE CANDIDATES SHOULD BE MID-SIZED BANKS THAT ARE NOT MERGED
The government is considering Bank of India, Central Bank of India, and Indian Overseas Bank as potential candidates for its ambitious plan to privatise two stateowned banks in the current financial year ending March, a senior government official said.
"The thinking is that the candidates should be mid-sized banks that are not merged," the official told Infor mist. "Some of these banks are under prompt corrective action framework. Ideally, the government would like to wait for them to come out of the framework before privatisation for better valuation." Though no decision has been taken, the banks that fit the bill are Bank of India, Central Bank of India and Indian Overseas Bank, the official said. The names of these three banks have come up in preliminary discussions on privatisation, the official said. Out of the three banks, Central Bank of India and Indian Overseas Bank are under Reserve Bank of India's
prompt corrective action framework. Under the framework, the RBI puts stringent conditions on operations of weak banks to improve their financials.
The government thinks that privatising state-owned banks that have been merged may be difficult because of their large size and lack of adequate investor appetite, the official said. The Budget for 2021-22 (Apr-Mar) had proposed privatising two public sector banks and one general insurance company in the current financial year. Privatisation of public sector banks will require legislative amendments, which were slated to be introduced in the Budget session of Parliament.
However, the amendments could not be introduced as the Budget session was adjourned nearly two weeks ahead of schedule.
"NITI Aayog has given its inputs on the privatisation process, and we are evaluating them," a second official said. The government had asked the NITI Aayog to identify the two public sector banks and one general insurer to be privatised.
The government aims to raise 1.75 trln rupees from disinvestment in 2021-22, more than five times of what it raised last year. Of the total 1.75 trln rupees from divestment, 1.0 trln rupees will come from stake sale in PSBsand financial institutions.