Friday, August 12, 2022
HomeFinancePublic-sector banks privatisation off agenda; PSB Bill unlikely in monsoon session

Public-sector banks privatisation off agenda; PSB Bill unlikely in monsoon session



1 413

The government is unlikely to introduce a Bill in the monsoon session of Parliament, scheduled to take place between July 18 and August 13, to facilitate the privatisation of two public-sector banks (PSBs), belying mounting expectations.

“There is no plan to push it (privatisation Bill) in the monsoon session, unless there is a last-minute change,” said a source.

While the government proposed privatisation of two PSBs in the last Budget, sections within it feel that the process could be initiated only after more consultations among stakeholders, particularly potential investors.

Niti Aayog has already recommended the privatisation of Indian Overseas Bank (IOB) and Central Bank of India (CBI), but the government is yet to take a final call on the names of the sell-off candidates. The Cabinet, too, has to ratify the draft Bill before it is introduced in Parliament. The government holds 96.38% in IOB and 93.08% in CBI.

Some analysts said, given the uncertain market conditions, a sell-off bid at this point is unlikely to generate good proceeds for the government. While the share value of IOB has dropped 6.1% in the past three months on the BSE, that of CBI has lost 6.6%.

The government is open to the idea of offloading its entire equity in the two banks that are proposed to be privatised, instead of the initial plan to retain a 26% stake, to garner greater interest from potential investors. With it, there would be procedural changes, including the quantum of individual shareholding in these banks, to facilitate the sell-off.

A recent paper by Poonam Gupta, NCAER director general and member of the economic advisory council to the Prime Minister, and former Niti Aayog vice-chairman Arvind Panagariya has suggested that the government privatise all state-run banks, barring SBI.

The Banking Laws (Amendment) Bill, 2021, was listed as part of the legislative business for the winter session of Parliament that concluded on December 23, 2021. However, the government deferred the bold plan amid fierce protests by bank unions ahead of polls in key states like Uttar Pradesh (which are over now).

The proposal gathered traction days after a team of officials from the Department of Investment and Public Asset Management (Dipam) held talks with investors during the road shows in the US last month for government’s stake sale in IDBI Bank.

The Bill proposes to “effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949”. These laws had led to the nationalisation of banks, so relevant provisions of these laws have to be changed to pave the way for the privatisation.

Already, Parliament has cleared a Bill to facilitate the privatisation of state-run general insurance companies by removing the requirement of the central government to hold at least 51% stake in an insurer.

Presenting the Budget for 2021-22, finance minister Nirmala Sitharaman had announced the privatisation of two PSBs and one general insurer. Neither has taken off so far.



RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments

%d bloggers like this: