Government think-tank, NITI Ayog, submitted the names of two banks for privatization under the Centre’s strategic disinvestment policy. If the recommendation is accepted, Central Bank of India and Indian Overseas Bank will become the first of the many state-run banks that will undergo privatization.
Finance Minister, Nirmala Sitharaman, had announced in the Union Budget 2021 that two public sector banks and one general insurance company would be privatized in FY22. Accordingly, the names recommended by NITI Ayog have been submitted to the concerned authorities in change of Disinvestment. Furthermore, Bank of India is being seen as a potential target for outright sale according to sources.
The process is expected to take a while as the proposal by the think-tank will be thoroughly vetted and screened by the disinvestment and financial departments. This allows the concerned authorities to discuss legislative changes which would be required to facilitate the privatization of public sector banks.
The proposal will also be reviewed by an inter-ministerial group of officials and the respective ministers before the Union Cabinet green lights it. In addition, the Reserve Bank of India (RBI) will also be included in discussions and consulted over matter related to laws and regulations that govern state-run entities.
Explaining the Government’s rationale behind the privatization of banks, Finance Minister Nirmala Sitharaman said that it was being done in order to bring up the other Indian banks to the same stature as the State Bank of India. “We need banks which are going to be able to scale up,” she said. “We want banks that are going to be able to meet the aspirational needs of this country.”
Recently, the sale of the Government’s holdings in IDBI Bank was authorized by the Cabinet and the whole process is expected to wrap up this current financial year. If the proposal for the sale of government stakes in the two banks go through, it will be a huge bonus to the privatization drive of the current administration.
NITI Ayog has also set eyes on three other state-run banks – Bank of Maharashtra, Punjab & Sind Bank and UCO Bank – as possible candidates for upcoming privatization drives.