In a move to raise the revenues India's government has shortlisted four mid-sized state-run banks for privatization, under a new push to sell state assets, news agency Reuters quoting government sources said.
Privatization 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 Prime Minister Narendra Modi's administration 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 as the matter is not yet public,Reuters reported.
Sources said that the selection for privatization of 2 of these banks will be started in the financial year 2021-2022, which starts from April. Officials said that the government is considering mid-level banks in the first round for privatization. But, in the coming years, the government can also consider some big banks.However, the government will continue to hold the majority stake in India's largest lender State Bank of India, which is seen as a 'strategic bank' for implementing initiatives such as expanding rural credit.
New Delhi also wants to modernize a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorize loans that soured during the pandemic as bad.
According to an estimate by bank unions, there are about 50 thousand people working in Bank of India. While the Central Bank of India has 33 thousand staff. Indian Overseas Bank has 26 thousand employees, while Bank of Maharashtra has 13 thousand employees. Bank of Maharashtra's smaller workforce could make it easier to privatize and therefore potentially one of the first to be sold, the sources said.
"Factors like number of employees, the pressure of the trade unions and political repercussions would impact a final decision," the source said, noting that the privatization of a particular bank could be subject to change at the last moment due to these factors.
The government aims at making use of disinvestment proceeds to finance various social sector and developmental programmes and also to infuse private capital, technology and best management practices in Central Government Public Sector Enterprises. Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, while presenting the Union Budget FY 2021-22 in Parliament announced that government has approved a policy of strategic disinvestment of public sector enterprises that will provide a clear road map for disinvestment in all non-strategic and strategic sectors.
On Monday workers started a two-day strike opposing the
government's move to privatize banks and sell stakes in insurance and other
companies.
The actual privatization process may take 5-6 months to start, one of the government sources said.
The government hopes that the Reserve Bank of India, the country's banking regulator, will soon ease lending restrictions on Indian Overseas Bank after an improvement in the lender's finances that could help its sale..
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