Government seeks complete exit from public sector banks

28 Jun 2022 , 01:21 PM

In a report, the Center reportedly plans to introduce a bill to allow the privatization of public sector banks during the upcoming Monsoon Session of Parliament. According to a government official informed of the events, The Economic Times said that the government is considering amending the law to let the Centre completely withdraw from banks and entirely privatize PSBs.

The Banking Companies (Acquisition and Transfer of Undertakings) Act of 1970 mandates that the federal government maintain a minimum 51 percent ownership holding in public sector banks. Prior to privatization, the Centre was supposed to keep at least a 26% share in PSBs, and this would be gradually reduced.

Another source told ET that the Centre’s bill will act as “an enabling mechanism” and that “we could present it in this session and then smooth out the other concerns.” According to the official, the modifications are based on possible conversations that may have taken place during recent roadshows for the share sale of the IDBI Bank.

The Reserve Bank of India (RBI) and the finance ministry are negotiating ownership and controlling shares for the privatization of PSBs. Promoters of private banks are now limited to owning a 26% interest in PSBs.

Nirmala Sitharaman stated that the government will privatize two public sector banks and one general insurer when presenting the Union Budget for FY22. The necessary adjustments would be submitted during the budget session, she had also stated.

The privatization of IDBI Bank is currently in progress. Since the bank was founded in accordance with the Companies Act of 1956, no legal modifications are required for its privatization.