NEW DELHI: India is looking to privatize more than half of its state-owned banks to reduce the number of government-owned lenders to just five,As part of an overhaul of the banking industry, government and banking sources said.
FIRST, TO SELL MAJORITY STAKE IN PSB
The first part of the plan would be to sell majority stakes in- Bank of India (BOI.NS),Central Bank of India (CBI.NS),Indian Overseas Bank (IOBK.NS),UCO Bank (UCBK.NS),Bank of MaharashtraandPunjab & Sind Bank (PUNA.NS),Leading to an effective privatisationof these state-owned lenders, a government official said.Such a plan would be laid out in a new privatisation proposal the government is currently formulating, this would be put before the cabinet for approval.
WHY PRIVATISATION?
The government is working on a privatisation planTo help to raise money by selling assets in non-core companies and sectorsWhen the country is strapped for funds due to lack of economic growth caused by the coronavirus pandemic. Several government committees and the Reserve Bank of India have recommended that India should have not more than five state-owned banks.The government has already said that there will be no more mergers.
D. SUBBARAO • Banks were nationalised 50 years ago in a different era, in a different context. • PSBs rendered commendable service to the nation by deepening bank penetration into the hinterland and implementing a variety of anti-poverty programmes.HE
PUT SOME QUESTION?
• Do we still need PSBs? • Isn’t the financial sector deep enough to take care of financial intermediation without the government at the steering wheel? • Aren’t there better uses for the government’s mind space and its time?
RAGHURAM RAJAN WRITES IN HIS BOOK
Ownership is just one contributor to. governance • Even some private banks have also been poorly governed. • So we need to look at pragmatic ways to improve governance across the board. • There certainly is a case to experiment by privatizing one or two mid-sized public sector banks. • Reducing the government stake below 50% for a couple of others. • While working on governance reforms for the rest. • We will then actually then have some evidence in future.
ANOTHER ANGLE
Government’s privatisation plan is being worked out when the banks may face rising bad loans later this financial year because of the fallout from the coronavirus crisis. But the divestment plans may not happen in this financial year due to unfavourable market conditions.
